[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                    THE BAYH-DOLE ACT (P.L. 96-517,
                        AMENDMENTS TO THE PATENT
                      AND TRADEMARK ACT OF 1980)--
                           THE NEXT 25 YEARS

=======================================================================

                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 17, 2007

                               __________

                           Serial No. 110-46

                               __________

     Printed for the use of the Committee on Science and Technology


     Available via the World Wide Web: http://www.house.gov/science


                                     
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                                 ______

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
MARK UDALL, Colorado                 LAMAR S. SMITH, Texas
DAVID WU, Oregon                     DANA ROHRABACHER, California
BRIAN BAIRD, Washington              ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina          VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois            FRANK D. LUCAS, Oklahoma
NICK LAMPSON, Texas                  JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
JERRY MCNERNEY, California           JO BONNER, Alabama
PAUL KANJORSKI, Pennsylvania         TOM FEENEY, Florida
DARLENE HOOLEY, Oregon               RANDY NEUGEBAUER, Texas
STEVEN R. ROTHMAN, New Jersey        BOB INGLIS, South Carolina
MICHAEL M. HONDA, California         DAVID G. REICHERT, Washington
JIM MATHESON, Utah                   MICHAEL T. MCCAUL, Texas
MIKE ROSS, Arkansas                  MARIO DIAZ-BALART, Florida
BEN CHANDLER, Kentucky               PHIL GINGREY, Georgia
RUSS CARNAHAN, Missouri              BRIAN P. BILBRAY, California
CHARLIE MELANCON, Louisiana          ADRIAN SMITH, Nebraska
BARON P. HILL, Indiana               VACANCY
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
                                 ------                                

               Subcommittee on Technology and Innovation

                    HON. DAVID WU, Oregon, Chairman
JIM MATHESON, Utah                   PHIL GINGREY, Georgia
HARRY E. MITCHELL, Arizona           VERNON J. EHLERS, Michigan
CHARLIE A. WILSON, Ohio              JUDY BIGGERT, Illinois
BEN CHANDLER, Kentucky               JO BONNER, Alabama
MIKE ROSS, Arizona                   ADRIAN SMITH, Nebraska
MICHAEL M. HONDA, California             
BART GORDON, Tennessee               RALPH M. HALL, Texas
                 MIKE QUEAR Subcommittee Staff Director
      RACHEL JAGODA BRUNETTE Democratic Professional Staff Member
          COLIN MCCORMICK Democratic Professional Staff Member
         TIND SHEPPER RYEN Republican Professional Staff Member
           PIPER LARGENT Republican Professional Staff Member
                 MEGHAN HOUSEWRIGHT Research Assistant


                            C O N T E N T S

                             July 17, 2007

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative David Wu, Chairman, Subcommittee on 
  Technology and Innovation, Committee on Science and Technology, 
  U.S. House of Representatives..................................     6
    Written Statement............................................     7

Statement by Representative Phil Gingrey, Ranking Minority 
  Member, Subcommittee on Technology and Innovation, Committee on 
  Science and Technology, U.S. House of Representatives..........     7
    Written Statement............................................     8

Prepared Statement by Representative Harry E. Mitchell, Member, 
  Subcommittee on Technology and Innovation, Committee on Science 
  and Technology, U.S. House of Representatives..................     9

                               Witnesses:

Mr. Arundeep S. Pradhan, Director, Technology and Research 
  Collaborations, Oregon Health & Science University; Vice 
  President for Annual Meetings and Board of Trustees, 
  Association of University Technology Managers
    Oral Statement...............................................    10
    Written Statement............................................    12
    Biography....................................................    37

Dr. Susan B. Butts, Senior Director, External Science and 
  Technology Programs, The Dow Chemical Company
    Oral Statement...............................................    37
    Written Statement............................................    39
    Biography....................................................    46

Mr. Wayne C. Johnson, Vice President, Worldwide University 
  Relations, Hewlett-Packard Company
    Oral Statement...............................................    46
    Written Statement............................................    48
    Biography....................................................    58

Dr. Mark A. Lemley, Professor of Law, Stanford Law School; 
  Director, Stanford Program in Law, Science, and Technology
    Oral Statement...............................................    57
    Written Statement............................................    58
    Biography....................................................    68

Dr. Mark G. Allen, Joseph M. Pettit Professor; Regents Professor, 
  Georgia Institute of Technology; Co-founder & Chief Technology 
  Officer, CardioMEMS, Inc., Atlanta
    Oral Statement...............................................    69
    Written Statement............................................    70
    Biography....................................................    93

Discussion.......................................................    94

             Appendix 1: Answers to Post-Hearing Questions

Mr. Arundeep S. Pradhan, Director, Technology and Research 
  Collaborations, Oregon Health & Science University; Vice 
  President for Annual Meetings and Board of Trustees, 
  Association of University Technology Managers..................   116

Dr. Susan B. Butts, Senior Director, External Science and 
  Technology Programs, The Dow Chemical Company..................   122

Mr. Wayne C. Johnson, Vice President, Worldwide University 
  Relations, Hewlett-Packard Company.............................   129

Dr. Mark A. Lemley, Professor of Law, Stanford Law School; 
  Director, Stanford Program in Law, Science, and Technology.....   135

Dr. Mark G. Allen, Joseph M. Pettit Professor; Regents Professor, 
  Georgia Institute of Technology; Co-founder & Chief Technology 
  Officer, CardioMEMS, Inc., Atlanta.............................   138

             Appendix 2: Additional Material for the Record

Letter from the Association of American Universities, Association 
  of American Medical Colleges, Council on Governmental 
  Relations, and National Association of State Universities and 
  Land-Grant Colleges, dated August 8, 2007......................   144

Statement of the Biotechnology Industry Organization.............   148


THE BAYH-DOLE ACT (P.L. 96-517, AMENDMENTS TO THE PATENT AND TRADEMARK 
                    ACT OF 1980)--THE NEXT 25 YEARS

                              ----------                              


                         TUESDAY, JULY 17, 2007

                  House of Representatives,
         Subcommittee on Technology and Innovation,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 1:17 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. David Wu 
[Chairman of the Subcommittee] presiding.



                            hearing charter

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                     U.S. HOUSE OF REPRESENTATIVES

                    The Bayh-Dole Act (P.L. 96-517,

                        Amendments to the Patent

                      and Trademark Act of 1980)--

                           The Next 25 Years

                         tuesday, july 17, 2007
                          1:00 p.m.-3:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Tuesday, July 17, the Subcommittee on Technology and Innovation 
of the Committee on Science and Technology will hold a general 
oversight hearing on P.L. 96-517, Amendments to the Patent and 
Trademark Act of 1980, commonly referred to as the Bayh-Dole Act. More 
than 25 years have passed since Bayh-Dole was enacted. The purpose of 
the hearing is to assess the current implementation of Bayh-Dole from 
the perspectives of universities and industry, and to hear 
recommendations that may be appropriate to improve the current 
implementation as we look toward the next 25 years.

2. Witnesses

Mr. Arundeep S. Pradhan is Director of Technology and Research 
Collaborations at Oregon Health & Science University.

Dr. Susan B. Butts is Senior Director of External Science and 
Technology Programs at The Dow Chemical Company.

Mr. Wayne C. Johnson is Vice President, Worldwide University Relations 
at Hewlett-Packard Company.

Dr. Mark A. Lemley is Professor of Law at Stanford Law School, and 
Director of the Stanford Program in Law, Science and Technology.

Dr. Mark G. Allen is Professor in the School of Electrical and 
Computing Engineering at Georgia Institute of Technology, and co-
founder and Chief Technology Officer of CardioMEMS, Inc.

3. Hearing Issues

          Impact of Bayh-Dole. What has been the impact of the 
        current implementation of Bayh-Dole on federally funded 
        university research, and the technology transfer and 
        commercialization of that research?

          University-Industry Relations. How has Bayh-Dole 
        shaped university-industry research collaboration? Are there 
        differences in interpretation of the statute and regulations by 
        universities and industry? Are there differences in the impact 
        across industry sectors, or for large and small businesses?

          Impact of Globalization. What is the possible effect 
        of the increasing globalization of research? Are U.S. companies 
        turning to foreign universities for research collaboration? How 
        do the intellectual property and business practices at U.S. 
        universities compare to universities in other developed and 
        developing countries?

          Impact on Universities and Innovation. Has Bayh-Dole 
        influenced basic university research, academic collaboration 
        and the broad dissemination of knowledge? In what ways does the 
        law promote innovation; has it created any barriers?

          Legislation. What changes in Bayh-Dole legislation, 
        if any, may be appropriate as we look to the next 25 years, to 
        promote innovation, commercialization of federally funded 
        research, and U.S. economic development?

4. Background--Bayh-Dole Legislation

    P.L. 96-517, Amendments to the Patent and Trademark Act of 1980, 
commonly referred to as Bayh-Dole, promoted the utilization of 
inventions arising from federally supported research and development. 
Bayh-Dole had other important policy objectives including (emphasis 
added):

          to encourage maximum participation of small business 
        firms in federally supported research and development efforts;

          to promote collaboration between commercial concerns 
        and nonprofit organizations, including universities;

          to ensure that inventions made by nonprofit 
        organizations and small business firms are used in a manner to 
        promote free competition and enterprise without unduly 
        encumbering future research and discovery;

          to promote the commercialization and public 
        availability of inventions made in the U.S. by U.S. industry 
        and labor;

          to ensure that the Government obtains sufficient 
        rights in federally supported inventions to meet the needs of 
        the Government and protect the public against nonuse or 
        unreasonable use of inventions.

    The legislation was motivated by a number of concerns in the 1970s. 
The U.S. lacked a uniform patent policy for federally funded research, 
and inventions from this research were not leading to commercial 
products and services. The Federal Government retained title to the 
inventions and licensed technology on a non-exclusive basis, providing 
insufficient incentive to make the sizable investment required to 
commercialize early stage, high-risk technologies.
    Under Bayh-Dole, a uniform technology transfer policy was created 
along with new incentives for commercialization. Non-profit 
organizations, including universities, and small businesses, could take 
title to inventions based upon federally funded R&D, and license 
technology to companies with exclusive licenses.
    The broader economic conditions were also important factor shaping 
Bayh-Dole. The U.S. economy was in a recession, productivity was 
declining, and the U.S. faced growing competition internationally from 
Germany and Japan. Promoting university based innovation and technology 
transfer to industry was seen as an important policy lever to counter 
these developments.

5. Hearing Issues

Impact of Bayh-Dole. The impact of Bayh-Dole can be measured in terms 
of technology innovation (patent disclosures and application), licenses 
granted, and new company spin-offs. It can also be measured in 
financial returns to the university to support further research and new 
jobs created in the region.
    According to the most recent published survey for FY 2005\1\ from 
the Association of University Technology Managers (AUTM) of their 
membership, 4,932 new licenses were signed in 2005 with 28,349 active 
licenses. 527 new products were introduced in 2005 from 151 
organizations, and cumulatively 3,641 new products were introduced 
between FY98 through FY05. 628 new spinoff companies were created in 
2005; 5,171 since 1980.
---------------------------------------------------------------------------
    \1\ AUTM U.S. Licensing Survey FY 2005. This is a survey of 
technology licensing (and related) performance for U.S. Academic and 
Non-profit Institutions and Technology Investment firms.
---------------------------------------------------------------------------
    In 2005, technology transfer offices received 17,382 invention 
disclosures and filed 9,536 patent applications of which 69.9 percent 
were provisional applications which gave a one year opportunity to test 
company interest before filing a full utility application. Technology 
transfer offices licensed primarily to startups (12.7 percent), small 
companies (50.2 percent), and large companies (30.9 percent). 37 
percent of total licenses and options reported in the survey were 
exclusive licenses.
    However, the financial returns to universities from licensing or 
equity positions in spin-off companies are highly concentrated. Of 141 
universities with licensing income in 1999 and 2000, 22 universities 
received almost 80 percent of the income and five universities received 
over 45 percent of the licensing income.\2\ This pattern has resulted 
in some universities taking a broader view of the appropriate metrics 
of technology transfer activity to include regional economic 
development.
---------------------------------------------------------------------------
    \2\ AUTM Technology Transfer Data for Two-Year Recurrent 
Respondents.

University-Industry Relations. Bayh-Dole has also shaped university-
industry research collaboration in areas beyond direct licensing. 
Industry collaborates with universities across a wide spectrum of 
activities from the exchange of ideas and researchers to transactions 
involving intellectual property. There is a perception that Bayh-Dole 
has broadly influenced these activities.
    Much of university licensing activity is focused on biotechnology 
where there is potentially larger financial return to the university, 
or at least the potential for some ``big wins.'' In fact, the 
Biotechnology industry traces its explosive growth to three events in 
1980: the Supreme Court decision in Diamond v. Chakrabarty (finding 
that Congress had intended patentable subject matter to ``include 
anything under the sun that is made by man''), Bayh-Dole, and P.L. 96-
480, the Stevenson-Wydler Technology Innovation Act of 1980, which 
covers technology transfer from federal laboratories.

Impact of Globalization. In the late 1970s, the U.S. faced increasing 
competition from Germany and Japan. Today, globalization is a much 
broader force with the increasing globalization of not only 
manufacturing and services, but research activities as well. U.S. 
companies are beginning to turn to foreign universities for research 
collaboration. This is in part driven by difference in business 
practices between U.S. and foreign universities and the opportunity for 
greater control of intellectual property. Agreements can be reached in 
days to weeks compared to what can be months and years in the U.S.

Impact on Universities and Innovation. There have been concerns raised 
about the impact of Bayh-Dole on the broad university research 
enterprise as well as the role of universities in the dissemination of 
knowledge. In particular, with Bayh-Dole's focus on ``downstream'' 
commercialization of research, there is concern that there is a 
negative impact on collaboration and innovation ``upstream'' in basic 
research.\3\
---------------------------------------------------------------------------
    \3\ Arti K. Rai and Rebecca Eisenberg, ``Bayh-Dole Reform and the 
Progress of Biomedicine,'' Law and Contemporary Problems 69, p. 289, 
2003.
---------------------------------------------------------------------------
    Recently, several universities and the Association of American 
Medical Colleges (AAMC) released a white paper, ``In the Public 
Interest: Nine Points to Consider in Licensing University Technology.'' 
\4\ The paper captures shared perspectives of the participating 
university research officers and licensing directors on policy issues 
related to university technology transfer, in particular, when 
universities license technologies ``in the public interest and for 
society's benefit.'' The paper identified nine points and provided 
example licensing clauses to address each point. The nine points 
included:
---------------------------------------------------------------------------
    \4\ ``In the Public Interest: Nine Points to Consider in University 
Licensing,'' March 6, 2007. newsservice.stanford.edu/news/2007/march7/
gifs/whitepaper.pdf

          Universities should reserve the right to practice 
        licensed inventions and to allow other non-profit and 
---------------------------------------------------------------------------
        governmental organizations to do so.

          Exclusive licenses should be structured in a manner 
        that encourages technology development and use.

          Strive to minimize the licensing of ``future 
        improvements.''

          Ensure broad access to research tools.

          Consider including provisions that address unmet 
        needs, such as those of neglected patient populations or 
        geographic areas, giving particular attention to improved 
        therapeutics, diagnostics and agricultural technologies for the 
        developing world.

Legislation. What changes in Bayh-Dole legislation or regulations, if 
any, may be appropriate to address these issues as we look to the next 
25 years, to promote innovation, commercialization of federally funded 
research, and U.S. economic development? The issues may be directly 
tied to the Bayh-Dole statute or a matter of implementation of the law.
    The issues raised include addressing incentives that discourage 
scientific sharing of information, protecting access to research tools, 
and the role government should play in pricing to increase humanitarian 
access to products and services such as therapeutic drugs.\5\
---------------------------------------------------------------------------
    \5\ Sara Boettiger and Alan B. Bennett, ``Bayh-Dole: if we knew 
then what we know now,'' Nature Biotechnology, March 2006 and Wendy H. 
Schacht, CRS Report RL32076, The Bayh-Dole Act: Selected Issues in 
Patent Policy and the Commercialization of Technology, December 8, 
2006;
---------------------------------------------------------------------------
    Chairman Wu. Welcome everyone, to this afternoon's general 
hearing on Bayh-Dole legislation and its effect on our economic 
competitiveness and our university enterprise.
    It has been a quarter century since Bayh-Dole was enacted. 
It is time to assess the impact of that legislation, and 
whether we can improve technology transfer from the federal 
investment in research. I want to mention that this will be 
only the first of several hearings on technology transfer. At 
this point in time, it is my intention to hold further 
subcommittee hearings on Stevenson-Wydler legislation.
    It took a good while, perhaps close to 20 years, to achieve 
passage of the Bayh-Dole legislation. The House Committee on 
Science and Technology held hearings in 1979 and 1980 on the 
original legislation, and this committee has been a very strong 
supporter of improving technology transfer.
    The broad economic conditions during the time of passage of 
Bayh-Dole were a factor in shaping it. The U.S. economy was in 
a deep recession. Productivity was declining, and our country 
faced growing competition internationally from both Germany and 
Japan and certain other countries. At that point in time, I was 
beginning to practice law in Silicon Valley, and quite frankly, 
there were folks who said that Silicon Valley was going to die, 
and that we just weren't going to compete in high tech any 
more. And there are others, policy-makers in Washington, D.C., 
who said potato chips, silicon chips, it hardly matters which 
one it is, because it is just all about money. And that is not 
true.
    Now, promoting university-based research and its subsequent 
technology transfer to industry, was seen at that time, and 
continues to be seen as a very, very important policy tool to 
counter international competition, and to stimulate, 
irregardless of international competition, domestic, economic, 
and job growth.
    The purpose of this hearing is to assess the current 
implementation of Bayh-Dole from the perspectives of 
universities and industry, and to hear recommendations to 
improve the implementation of Bayh-Dole, as we look forward to 
the next quarter century.
    A few key questions that we will consider. What has been 
the impact of the current implementation of Bayh-Dole on 
federally funded university research, technology transfer, and 
the commercialization of that research? How has Bayh-Dole 
shaped university-industry research collaboration? Are there 
differences in interpretation of the statute and regulations by 
universities, industry, and others? What is the possible effect 
of the increasing globalization of the research enterprise? Are 
U.S. companies turning to foreign universities for research 
collaboration? Are foreign companies turning to U.S. 
universities to the same extent? How do the intellectual 
property and business practices at U.S. universities compare to 
universities in other developed and developing countries? Has 
Bayh-Dole influenced basic university research, academic 
collaboration, and the broad dissemination of knowledge? In 
what way does the law promote innovation? Has it created any 
barriers? Finally, how can we improve technology transfer as we 
look forward to the next 25 years, to promote innovation and 
commercialization of federally funded research, and promote 
U.S. economic development?
    All of these questions are on the table today, and in our 
subsequent hearings, we look forward to hearing the thoughts of 
our witnesses, and also of the comments and questions from our 
fellow members of this subcommittee.
    And now, I would like to recognize my colleague and good 
friend, the ranking member from Georgia, Dr. Gingrey, for his 
opening remarks.
    [Statement of Mr. Wu follows:]

                Prepared Statement of Chairman David Wu

    I want to welcome everyone to this afternoon's general hearing on 
Bayh-Dole. More than 25 years have passed since Bayh-Dole was enacted. 
It is time to assess the impact of Bayh-Dole and how we can improve 
technology transfer from Federal investment in R&D. I want to mention 
that this will be our first hearing on technology transfer issues. The 
Subcommittee will hold a subsequent hearing on Stevenson-Wydler.
    It took almost 20 years to achieve passage of the Bayh-Dole Act. 
Indeed the House Committee on Science and Technology, held hearings in 
1979 and 1980 on the original legislation. This committee has been a 
strong supporter of improving technology transfer.
    Broad economic conditions were a factor shaping Bayh-Dole. The U.S. 
economy was in a recession, productivity was declining, and the U.S. 
faced growing competition internationally from Germany and Japan. 
Promoting university based innovation and technology transfer to 
industry was seen as an important policy lever to counter these 
developments. And it still is today as we face greater global 
competition--which now includes R&D.
    The purpose of this hearing is to assess the current implementation 
of Bayh-Dole from the perspectives of universities and industry, and to 
hear recommendations to improve the current implementation as we look 
toward the next 25 years.
    A few key questions we will consider today:

          What has been the impact of the current 
        implementation of Bayh-Dole on federally funded university 
        research, technology transfer and commercialization of that 
        research?

          How has Bayh-Dole shaped university-industry research 
        collaboration? Are there differences in interpretation of the 
        statute and regulations by universities and industry?

          What is the possible effect of the increasing 
        globalization of research? Are U.S. companies turning to 
        foreign universities for research collaboration? How do the 
        intellectual property and business practices at U.S. 
        universities compare to universities in other developed and 
        developing countries?

          Has Bayh-Dole influenced basic university research, 
        academic collaboration and the broad dissemination of 
        knowledge? In what ways does the law promote innovation; has it 
        created any barriers?

    And finally,

          How can we improve technology transfer as we look to 
        the next 25 years, to promote innovation, commercialization of 
        federally funded research, and U.S. economic development?

    All these questions are on the table today for comment and 
discussion by our witnesses and we look forward to hearing your 
thoughts.
    Now, I would like to recognize my colleague and the ranking member 
from Georgia, Dr. Gingrey, for his opening remarks.

    Mr. Gingrey. Good afternoon, Mr. Chairman, and certainly, I 
appreciate your holding this hearing on the Bayh-Dole Act.
    And certainly, as you point out, it is a timely issue. We 
have just celebrated the Act's 25 years of existence. I agree 
with you, Mr. Chairman, the time is indeed right to look at the 
program, and see where we can improve it, and ensure that the 
next 25 years are just as successful as have been the past 25 
years.
    In The Economist, and this is a quote: The Bayh-Dole Act is 
``probably the most inspired piece of legislation to be enacted 
in America over the past half-century.'' I don't think that is 
an embellishment, when we think about the remarks that you just 
heard from the Chairman, in regard to the global economy, and 
what our concerns might be as we go forward.
    The Bayh-Dole Act was passed in an era of deep concern that 
the United States was indeed losing that competitive edge to 
some of these foreign countries, certainly, India and China, to 
name two big ones. Its impact in reversing that trend has been 
phenomenal. In fact, Bayh-Dole has been the most successful 
technology transfer program ever implemented. Prior to Bayh-
Dole, only five percent of government-owned patents were ever 
used in the private sector. Let me repeat that. Only five 
percent of government-owned patents were ever used in the 
private sector.
    Since the passage of this landmark legislation, there has 
been a tenfold increase in academic patents. It is often said 
that the clearest form of flattery is imitation. Well, 
countries all over the world are indeed copying Bayh-Dole, from 
the Europeans to the governments of Japan and India, and I am 
sure China as well. As we are now combating the often negative 
effects of globalization, perhaps there is no better time, Mr. 
Chairman, to see if there are any improvements that we can make 
in this law.
    Some of the principal players in this program, businesses 
do say that it has become increasingly difficult to come to an 
agreement with universities. I hope we will be able to find out 
in this hearing what is the problem. And so, instead, some 
businesses say they are increasingly making the sort of 
cooperative agreements that Bayh-Dole is supposed to facilitate 
in this country, but they are making them with foreign 
universities, not American universities. It is sort of a 
globalization of research, if you will.
    So, we need to ensure that Bayh-Dole meets the 21st Century 
needs of both business and universities, in order to ensure 
that the United States' competitiveness is first and foremost; 
because we are, ladies and gentlemen, in an economic war. Make 
no mistake about that. The Economist went further, and said, 
and I quote: ``A dollar's worth of academic invention or 
discovery requires upwards of $10,000 of private capital to 
bring it to market.'' So, clearly, there is a need to marry 
private enterprise with university research, as Bayh-Dole 
intended, when it was originally passed 25 years ago.
    Mr. Chairman, I indeed, as a graduate of the Georgia 
Institute of Technology, would like to plug my alma mater at 
every shameless opportunity, I appreciate your holding this 
hearing on such an important topic, and I do look forward to 
hearing from all of our witnesses, not just the one from 
Georgia Tech.
    [The prepared statement of Mr. Gingrey follows:]

           Prepared Statement of Representative Phil Gingrey

    Good Afternoon Mr. Chairman. I appreciate you holding this hearing 
on the Bayh-Dole Act. It's a timely issue, as we have just celebrated 
the Act's first 25 years in existence. I agree with you, Mr. Chairman, 
that the time is indeed right to look at the program and see where it 
can be improved to ensure that its next 25 years are as successful as 
its first 25 years.
    According to The Economist, ``the Bayh-Dole Act is [p]robably the 
most inspired piece of legislation to be enacted in America over the 
past half-century.'' The Bayh-Dole Act was passed in an era of deep 
concern that the U.S. was losing its competitive edge to foreign 
countries. Its impact in reversing that trend has been phenomenal.
    In fact, Bayh-Dole has been the most successful technology transfer 
program ever implemented. Prior to Bayh-Dole, only five percent of 
government owned patents were ever used in the private sector. Since 
passage of this landmark legislation, however, there has been a tenfold 
increase in academic patents.
    It is often said that the clearest form of flattery is imitation. 
Well, countries all over the world are copying the Bayh-Dole Act--from 
the Europeans to the governments of Japan and India.
    As we are now combating the often negative effects of 
globalization, perhaps there is no better time to see if there are any 
improvements to be made to the Bayh-Dole law.
    Some of the principal players in this program--businesses--do say 
that it has become increasingly difficult to come to agreement with 
universities. Instead, some businesses say that they are increasingly 
making the sort of cooperative agreements that Bayh-Dole is supposed to 
facilitate, but they are making them with foreign universities--a sort 
of globalization of research. We need to ensure that Bayh-Dole meets 
the 21S` Century needs of both businesses and universities, in order 
ensure that U.S. competitiveness is first and foremost.
    Further, according to The Economist, ``A dollar's worth of academic 
invention or discovery requires upwards of ten thousand dollars of 
private capital to bring [it] to market.'' Clearly there is a need to 
marry private enterprise with university research, as Bayh-Dole 
intended.
    Mr. Chairman, I appreciate your holding this hearing on such an in 
important topic. and I look forward to hearing from all of the 
witnesses. Thank you.

    Chairman Wu. Well, Dr. Gingrey, I think that Georgia Tech 
always has a better football team than Oregon Health and 
Science University.
    If there are Members who wish to submit opening statements, 
your statements will be added to the record.
    [The prepared statement of Mr. Mitchell follows:]

         Prepared Statement of Representative Harry E. Mitchell

    Thank you, Mr. Chairman.
    Throughout the twentieth century, the United States led the world 
in university-driven research and development.
    This research inspired much of the innovation upon which we have 
come to rely. From the Internet boom to countless medical 
breakthroughs, university research has benefited us all.
    There is no doubt that our world class university system with 
federal support, such as the Bayh-Dole Act, is one of the reasons our 
nation has enjoyed the technological success that it has.
    This law enabled the spread of government funded research from the 
world of ideas into the world of application. The patent transfer 
policy enabled businesses to focus on production, while the government 
took on the risk associated with uncertain research projects.
    Since enactment, Bayh-Dole related development has created over a 
quarter of a million jobs and added $40 billion annually to our 
economy. In my district, Bayh-Dole has benefited Arizona State 
University.
    The advancement of communications technology and global trade 
agreements has led to the inevitable re-examination of university, 
government, and business research partnerships.
    As we consider the next twenty-five years of this legislation, the 
growing global market cannot be too far from our consideration.
    We must strive to maintain the high intellectual standards of our 
top universities, and ensure that their research makes it into real-
world applications through strategic business and government 
partnerships.
    I am looking forward to hearing from our witnesses to see how we 
can accomplish these complementary goals.
    I yield back the balance of my time.

    Chairman Wu. As our witnesses are well aware, your time is 
limited to five minutes. Please feel free to summarize your 
written testimony, and now, let me introduce the witnesses.
    Mr. Arun Pradhan, who is the Director of Technology and 
Research Collaborations at Oregon Health and Science 
University. We continue to have aspirations for your football 
team in the future.
    Dr. Susan Butts is Senior Director of External Science and 
Technology Programs at the Dow Chemical Company.
    Mr. Wayne Johnson is Vice President, Worldwide University 
Relations, at Hewlett-Packard Company.
    Mr. Mark Lemley is Professor of Law at Stanford Law School, 
and let me warn you, Dr. Lemley, that you have the job that I 
want. And Professor Lemley is Director of the Stanford Program 
in Law, Science, and Technology.
    And Dr. Mark Allen, Professor at a great institution in 
Georgia, in the School of Electrical and Computing Engineering 
at Georgia Institute of Technology, and Co-Founder and Chief 
Technology Officer of CardioMEMS.
    We will begin testimony with you, Arun.

STATEMENT OF MR. ARUNDEEP S. PRADHAN, DIRECTOR, TECHNOLOGY AND 
 RESEARCH COLLABORATIONS, OREGON HEALTH & SCIENCE UNIVERSITY; 
   VICE PRESIDENT FOR ANNUAL MEETINGS AND BOARD OF TRUSTEES, 
         ASSOCIATION OF UNIVERSITY TECHNOLOGY MANAGERS

    Mr. Pradhan. Mr. Chairman, Ranking Member Gingrey, and 
honorable Members of the Subcommittee, thank you for this 
opportunity to testify before you today on the important topic 
of the Bayh-Dole Act. In addition to my role as Director for 
Technology and Research Collaborations at Oregon Health & 
Science University, I am also on the Board of Trustees for the 
Association for University Technology Managers, or AUTM.
    I have been asked to provide my opinion, as well as express 
the views of the AUTM Board, on various topics related to the 
Bayh-Dole Act, and how it relates to academic technology 
transfer. These views are a result of my 19 years of experience 
in this industry, covering three institutions in Utah, 
Colorado, and now, Oregon. We believe that the Bayh-Dole has 
been instrumental in accelerating innovation in the United 
States, and hopefully, will continue to be a key factor in 
driving U.S. innovation policy for the next 25 years.
    As Ranking Member Gingrey stated, The Economist called the 
Bayh-Dole Act one of the most possibly inspired pieces of 
legislation to be enacted in America, that unlocked inventions 
and discoveries throughout the United States. The Bayh-Dole Act 
is as viable today as it was when conceived and passed, and I 
believe that we are only seeing the proverbial tip of the 
iceberg. The impacts of Bayh-Dole are diverse, such as the 
5,000 companies that are based on university research, the 1.25 
products per day that have been introduced as a result of that 
over the last 10 years, the 260,000 jobs that have been 
created, and the addition of over $40 billion annually to the 
U.S. economy. The Biotechnology Industry Organization, or BIO, 
has identified over 350 drugs based on federally funded 
research that are either available now, or are currently in 
clinical trials.
    Another impact of Bayh-Dole, according to the former 
President of the NASDAQ, is that approximately 30 percent of 
its value is rooted in university-based federally funded 
research, which might never have been realized but for Bayh-
Dole. State investment in innovation has also been a key, 
although unanticipated outcome of the Bayh-Dole Act. Just since 
2005, 19 states have begun initiatives targeted to innovation, 
representing approximately $4 billion in the next 10 years.
    A key similarity to a number of these initiatives is the 
role of universities as drivers of regional economic 
development. In Oregon, for example, several such programs are 
coordinated through the Oregon Innovation Council. Signature 
research centers in the field of nanotechnology, bio-economy, 
and sustainable technologies, and drug development and 
translational research, funding of programs to foster 
university-industry partnerships in seafood, manufacturing, and 
food technologies, and the creation of university venture 
development funds through Oregon tax credits, all come together 
in Oregon's investment into resources that foster innovation 
and development.
    With respect to university-industry interactions, it is an 
issue of competing cultures and drivers, trying to create 
partnerships for societal and mutual benefit. These differences 
are most often highlighted in negotiations regarding the right 
to publish and intellectual property. These issues do not arise 
directly from Bayh-Dole, but from the fundamentally different 
roles that universities and industry play in society.
    Any partnership based on economic incentives needs to be 
fair to both parties in order to succeed. It is therefore 
incumbent on both parties to recognize the synergies and 
differences, as well as federal and State regulations and 
policies that play a role to arrive at mutually beneficial 
partnerships. The Bayh-Dole Act is one such example.
    The Bayh-Dole Act fundamentally provides a simple structure 
that works as intended, and should not be substantially 
altered. Further, the Bayh-Dole Act offers great opportunity to 
ensure that technology can be appropriately packaged and 
commercialized. As you yourself suggested, one dollar of 
academic research requires $10,000 of development to make it 
into a product. The Nine Points to Consider document that is 
being promoted by a number of organizations in AUTM, for 
example, begins to provide consistency to the implementation of 
Bayh-Dole to arrive at these objectives.
    If anything, Bayh-Dole needs to be strengthened, starting 
with a comprehensive look at programs and initiatives being 
implemented, successful technology transfer programs, local and 
regional factors that contribute to the success of 
commercializing federally funded research. One such example 
would be to provide effective oversight, which would be able to 
address the implementation of Bayh-Dole across federal 
agencies.
    In summation, I would like to emphasize that technology 
transfer at universities, as it exists today, is a complex 
process that has multiple roles, ranging from being good 
stewards of public resources to participants in economic 
development. These roles are, in turn, defined by local, 
regional, and national needs and regulations.
    It is critical that the U.S. preserve Bayh-Dole and its 
fundamental elements, and continue to support funding of basic 
research, so that our country can maintain its leading edge in 
innovation in this increasingly competitive global environment.
    Thank you.
    [The prepared statement of Mr. Pradhan follows:]

               Prepared Statement of Arundeep S. Pradhan

    Mr. Chairman, Ranking Member Gingrey and honorable Members of the 
Subcommittee, thank you for the opportunity to testify before you today 
on the important topic of the Bayh-Dole Act which has been instrumental 
in accelerating the evolution of innovation in the United States, and 
hopefully will continue to be a key factor in driving the U.S. 
innovation policy for the next 25 years.
    My name is Arundeep S. Pradhan, and I am currently the Director of 
Technology and Research Collaborations at the Oregon Health & Science 
University (OHSU) in Portland, Oregon and serve on the Board of 
Trustees for the Association of University Technology Managers (AUTM). 
AUTM is a nonprofit organization dedicated to promoting, supporting and 
enhancing the global academic technology transfer profession through 
education, training and communications. AUTM's more than 3,500 members, 
primarily managers of intellectual property, represent more than 300 
universities, research institutions and teaching hospitals as well as 
numerous businesses and government organizations.
    My office at OHSU is responsible for managing and commercializing 
the intellectual assets of the university; forging ties with industrial 
partners; and participating in various programs and initiatives with 
institutional, local, State and regional groups to align the interests 
of universities, city and State constituencies as to effectively 
achieve success in technology transfer objectives.
    I have been asked to give my opinion, as well as express the views 
of the AUTM Board, on various aspects of the Bayh-Dole Act (35 U.S.C. 
200-212) and how it relates to academic technology transfer. These 
views are a result of my 19 years of experiences in this industry, 
which began as a student working in the technology transfer office at 
the University of Utah where we established the culture for 
collaborating not only with numerous start-up companies, but also with 
existing companies in the fields of biotechnology, pharmaceutics, 
electronics and software. I subsequently spent five years at the 
Colorado State University Research Foundation in Fort Collins, where we 
continued the proactive approach to collaborating with State, local and 
regional organizations to further technology transfer and economic 
impact missions of the university.

Historical Perspective

    In 1980 prior to the Bayh-Dole Act, the Federal Government held 
title to approximately 28,000 patents of which fewer that five percent 
were licensed to companies for commercialization into products per the 
1998 GAO Report on the Act. This lack of commercialization can be 
attributed to several factors, among which are a lack of incentives for 
universities and faculty to engage in technology transfer, patent 
policy that varied by federal agency, and a lack of clarity of 
ownership of patents developed under federal funding.
    The Bayh-Dole Act represented a fundamental change in government 
patent policy. It provided ownership and title to any invention made in 
whole or in part with federal funds under Bayh-Dole to universities and 
small business. The government reserved for itself a royalty-free 
license to practice any such invention for governmental purpose. 
Further, the Bayh-Dole Act was instrumental in establishing a Federal 
patent policy that was uniformly applied to all of its agencies, as 
well as providing the first statutory authority for the government 
itself to obtain, own and license patents.
    The Committee on Science and Technology has been instrumental in 
recognizing that federal patent policy is an integral part of U.S. 
competitiveness and helped to shape the current environment in which we 
function. This committee not only was instrumental in fashioning the 
Bayh-Dole Act, but also the Federal Technology Transfer Act in 1986. We 
thank you for your foresight in establishing policies that have helped 
the U.S. be a leader in innovation.

Summary Conclusions

1.  Impact of the Bayh-Dole Act on Research, Technology Transfer and 
Commercialization

    On December 14, 2002, The Economist stated that ``Possibly the most 
inspired piece of legislation to be enacted in America over the past 
half-century was the Bayh-Dole Act of 1980. Together with amendments in 
1984 and augmentation in 1986, this unlocked all the inventions and 
discoveries that have been made in laboratories throughout the United 
States with the help of taxpayer's money. More than anything, this 
single policy measure helped to reverse America's precipitous slide 
into industrial irrelevance.'' The Bayh-Dole Act truly has been 
instrumental in achieving that goal.
    The Bayh-Dole Act is as fully viable today as it was when passed in 
1980. Since 1980, American universities have spun off more than 5,000 
companies, which have been responsible for the introduction of 1.25 
products per day into the marketplace and have contributed to the 
creation of over 260,000 jobs. The result has been a contribution of 
over $40 billion dollars annually to the American economy.
    The Biotechnology Industry Organization (BIO) has identified 60 
drugs derived from university research, and there are over 300 
biotechnology therapeutic products based on federally funded research 
that are now in clinical trials. Examples of these include the 
Hepatitis B Vaccine (Fox Chase Cancer Center); New Therapeutics for 
Prostate Cancer (OHSU); New Treatments for Heart Disease (Emory 
University).
    These breakthroughs of commercial applications occur not only in 
the field of biotechnology and life sciences, but in all fields ranging 
from electronics to agriculture [7, 8]. A few examples from AUTM's 
Better World Report series (http://www.betterworldproject.net/) are:

Arizona

          Lighting strike detection technology that is now 
        deployed in over 40 countries (University of Arizona)

          Chemical-free technology to help control crop 
        diseases is licensed to companies in the Midwest (University of 
        Arizona)

          A new class of carbon compounds based on fullerenes 
        which can be the basis for among other things new flat panel 
        display technologies, batteries, and capacitors(University of 
        Arizona)

California

          Topical gel treatment for AIDS-related Kaposi's 
        sarcoma (Salk Institute for Biological Studies)

          Electrodes that enable three-dimensional imaging with 
        atomic force microscopy (Stanford University)

          Novel IV catheters that eliminate risks of 
        potentially dangerous needlesticks (City of Hope)

Oregon

          Rib-fixation device for fractured ribs (Oregon Health 
        & Science University)

          Improved three-dimensional depiction of proteins and 
        large molecules (University of Oregon)

          Novel non-toxic wood adhesives (Oregon State 
        University)

Nebraska

          Drought tolerant grass (University of Nebraska-
        Lincoln)

          New Organo-metallic reagents for the synthesis of 
        drugs (University of Nebraska-Lincoln)

    And there are numerous more examples ranging over many areas of 
research.

2.  How has the Bayh-Dole Act Shaped University-Industry Relations?

    Prior to passage of the Bayh-Dole Act and with no uniform 
government patent policy in place, each of the government agencies had 
developed its own patent policy. The majority of those were ``title'' 
policies, where ownership resided in the government as represented by 
the agency. Most agencies had also adopted a non-exclusive licensing 
policy to such inventions. As a consequence industry was highly 
reluctant to obtain non-exclusive licenses from the government knowing 
it could not really exercise control over the invention licensed and 
that a competitor could obtain a similar license. Simply put, there was 
no reward, in the form of marketplace exclusivity to justify the risk 
and expense necessary to develop an invention for the market.
    Moreover, industry was reluctant to fund research at the 
universities for fear of government funds ``contaminating'' the 
research that was sponsored and because of the ``title'' policy adopted 
by the agencies, depriving the particular sponsor of the right to 
assert ownership to any invention arising from the sponsored research. 
The ``contamination'' principle was particularly onerous since there 
was no de minimis amount of federal funding specified for triggering 
the government's right to take title to an invention and even a single 
dollar of government money co-mingled with the industry-sponsor 
research funds could permit the government to assert rights to the 
invention or, at least, put a cloud on the title.
    The passage of the Bayh-Dole Act established certainty of title in 
and to inventions conveyed to the universities under the Act and 
alleviated the industry-sponsor's fears, thereby encouraging additional 
sponsorship, collaborative efforts, and expanded licensing 
opportunities. Since the government retains a non-exclusive right to 
inventions made in whole or in part with government funds but only for 
governmental purposes, the relationship with the private sector is 
truly a university-industry-government relationship and one which 
industry has been willing to accept.
    The Bayh-Dole Act has made institutions more aware of their role in 
being good stewards of public resources, including capturing a fair 
economic value of federally funded research contributions, and as Bayh-
Dole requires, reinvesting any return in research and education. While 
Bayh-Dole does not directly govern industry sponsored research, it 
establishes good practices within our offices that ensure that 
federally-funded technologies are commercialized for the public 
benefit, both as a result of licensing inventions directly from 
federally funded research as well as obtaining exclusive licenses to 
inventions resulting from industry sponsored research. It is incumbent 
on both sectors to foster, encourage and grow these collaborations.

3.  Effects of Globalization of Research

    The global environment has changed considerably in the last two 
decades. Countries, such as Germany, United Kingdom, Singapore, China 
and India, are increasingly pumping resources into research and 
development and establishing ties between industry and academic 
institutions. The technological and basic research leads that the U.S. 
has enjoyed over the last two decades should not be taken for granted. 
Recognizing the success of the Bayh-Dole Act in the U.S., other 
countries are emulating our lead by passing similar laws. Bayh-Dole has 
reduced certain barriers for collaborations with companies and also 
encouraged entrepreneurship across all aspects of university research. 
This entrepreneurial environment provides a key element in attracting, 
training and retaining students, young faculty and thought leaders when 
other countries are becoming more welcoming to entrepreneurship.
    Mr. Chairman, I understand that the Committee has heard reports 
that industry is looking for research partners overseas because they 
find it so hard to negotiate with universities in the United States. I 
cannot vouch for whether those reports are accurate, or what role 
different factors, including cost, play in those decisions. I can speak 
to my experiences and to the issues that take up the most time in 
university negotiations with industry.
    The biggest, most time-consuming issue involves faculty 
researchers' right to publish their research findings and share the 
research data with their colleagues. This is a core issue for 
universities. The ability of faculty to publish, and thus to advance 
the state-of-the-art, is central to our mission and is probably the 
most important method of knowledge transfer we have. Intellectual 
property rights are also a point of negotiations. They are complicated 
because a fair allocation of rights and access to rights really depends 
on the particular facts of the research. It is hard to articulate a 
general rule for what is fair because the facts and circumstances are 
so important. These issues do not arise from Bayh-Dole, but from the 
fundamentally different roles that universities and industry have in 
society.
    In my capacity at OHSU, as well as historically, I have seen 
significant increases in university-industry partnerships. Over the 
last five years at OHSU, the number of industry-sponsored research 
agreements has doubled and the amount of research funding has almost 
tripled. I feel that these collaborations will continue to grow in the 
future. It is critical that the U.S. preserve Bayh-Dole and its 
fundamental elements and continue to support the funding of basic 
research so that our country can maintain our leading edge in 
innovation in this increasingly competitive global environment.

4.  The Bayh-Dole Act's Influence on Basic Research

    A study by the American Association for the Advancement of Science 
(AAAS) indicates that there is no significant ``negative'' impact of 
technology patents and commercialization on scientific research in 
terms of access and sharing. There has however, been net positive 
outcome in terms of collaborations with industry, as is highlighted by 
the fact that the U.S. has seen a significant increase in joint 
industry-university scientific papers that the National Science 
Foundation cited as a significant achievement for science in their 
annual Science and Engineering Indicators.
    In 2006, key individuals from the university technology transfer 
community and Association of American Medical Colleges (AAMC), 
developed ``Nine Points to Consider when Licensing University 
Technology'' (attached). This document has been adopted by AUTM and 
recommended to its members; the list of signatories is now kept by the 
AUTM, much like AUTM serves as a repository for signatories of the 
Uniform Biological Materials Transfer Agreement. This document is a set 
of guiding principles that illustrate general good practices. The first 
point in this document is to reserve the right to practice licensed 
inventions and to allow other non-profit and government organizations 
to do so. The National Institutes of Health which provides substantial 
funding for basic research also supports this approach. While Bayh-Dole 
allows licensing of inventions for commercialization, it does not 
preclude use of such inventions for continued research. This and the 
other points in this document are meant to provide good practice 
guidelines for licensing. As each negotiation and relationship is 
unique, it is incumbent to strike a balance between the business needs 
of our industry partners as well as the fulfillment of the core mission 
of the universities.

5.  Bayh-Dole: The Next Twenty-five Years

    The architects of the Bayh-Dole Act, in which this committee played 
a role, exhibited profound insight as Bayh-Dole serves as the 
foundation for technology-based economic development by allowing 
universities to work regionally with established or start up companies 
to launch new products to benefit the public and at the same time, 
remains flexible to encourage partnerships across a broad spectrum of 
industries for a wide variety of technologies that are commercialized 
under different business models. Bayh-Dole has been instrumental in 
linking the Federal and State governments, research universities, small 
business and the corporate worlds [11]. Because the impact of the Bayh-
Dole is now far reaching and affects the economy at multiple levels, 
any changes, if warranted at all, need to be evaluated prudently and 
carefully to avoid disruption of the innovation ecosystem. I, the AUTM 
Board of Trustees, as well as other organizations, believe that Bayh-
Dole works well as intended and we anticipate that Bayh-Dole will 
continue to accelerate technology transfer and foster university-
industry partnerships far into the future.

What has been the impact of Bayh-Dole on federally funded research and 
technology transfer and commercialization of that research?

    It has now been twenty eight years since Bayh-Dole passed. In those 
twenty eight years the Bayh-Dole Act has had tremendous impact on the 
innovation economy of the United States and has become the model for 
technology-based economic development not only in the U.S., but on a 
global scale. Countries such as Japan, United Kingdom, Germany and 
others hope to achieve the same success as we have in the U.S., and 
even developing countries are instituting means to utilize their 
universities' talents and research results to boost their economies.
    The fundamental stated goal of Congress in passing the Bayh-Dole 
Act was to promote the utilization of inventions arising from federally 
supported research and development. I, as well as the AUTM Board, 
believe that those goals have been achieved and we are becoming more 
effective in how this intention is implemented. One clear indicator of 
innovation is the increase in ``invention disclosures'' from university 
faculty. There is imaginative research, at which faculty excels, from 
which, in turn, arises invention and innovation. The increase in 
invention disclosures is an indication that there has been a cultural 
change in how faculty and academic institutions view transferring the 
results of research in a manner to further benefit the public. In 
addition to the traditional method of publishing research results which 
continues to be pursued vigorously, universities and their faculty are 
increasingly aware that commercialization of research results can 
significantly impact society through improving the health, welfare and 
safety of the public. And, as with any cultural changes, it takes time; 
it is not something that will be adopted at the turn of a switch. In 
1980, approximately 25 U.S. universities had technology transfer 
offices and no uniform federal patent policy existed. Today, more than 
230 U.S. universities support such offices. In 1980, only a few patents 
were issued to universities. Today, universities are granted 
approximately four percent of U.S. patents. This success has its roots 
in the Bayh-Dole Act.
    The academic community and federal agencies continue to find new 
ways to innovate. This is evidenced by new programs, such as NIH's 
Clinical and Translational Science Awards that encourage 
interdisciplinary collaborations, collaborations with companies and 
movement of research from the bench to its applications. While this may 
indicate a willingness to use federal research funding to implement 
applications of basic research, the emphasis of federally funded 
research clearly continues to be on basic research. A recent study 
conducted by the AAAS concludes that scientific research has not been 
hindered significantly by technology patents and licensing activities 
[4]. Therefore, federally-funded inventions can continue to stimulate 
more research while being developed into useful, commercial products.
    There are annual increases in the activities and outcomes that AUTM 
has been tracking for the last fifteen years. Since 1980, there are now 
over 28,000 active licenses of technologies to companies, and, 5,171 
spin-off companies based on university research [2]. A great majority 
of these, in fact, arose during the last decade, indicating an 
acceleration of the rate at which research is transferred into the 
market place. These numbers only tell part of the story. Over the last 
two years, AUTM has documented specific societal impact through the 
Better World Reports that contain descriptions of university-based 
discoveries and inventions that have had a significant impact on the 
health of our citizens and the economic well-being of our society. This 
is not the only measure of the innovation economy on which the success 
of Bayh-Dole should be based. According to the former President of the 
NASDAQ stock market, an estimated 30 percent of its value is rooted in 
university-based, federally funded research results which might never 
have been realized but for the Bayh-Dole Act. Technology transfer as it 
exists today is a complex process that has multiple roles and 
objectives defined by local, regional, and national needs and 
regulations.
    Since 1997, when AUTM started tracking this metric, 3,641 new 
products were introduced in the economy, 527 in 2005 alone. This 
represents 1.25 products per day [2]. This illustrates significant 
innovation occurring in our universities and nation that is directly 
based on federally funded research at universities and small 
businesses.
    State investment in innovation has also been a key, although 
unanticipated, outcome of the Bayh-Dole Act. A significant number of 
these investments involve academic institutions which are viewed as key 
partners and drivers of regional economic development. Since 2005, 19 
states have begun initiatives targeted to innovation in the form of 
investment into university R&D these include providing private sector 
R&D incentives to partner with academic institutions, new business 
innovation support, and tax credits for new business R&D investment. 
This incremental investment represents approximately $4 billion in the 
next ten years and is only a sample of programs being initiated by 
various states.
    In Oregon, as in many other states, several programs were initiated 
to encourage the transfer of research from research institutions to the 
marketplace. In the last six years, Oregon has committed to the 
formation of Signature Research Centers in the fields of 
nanotechnology, bio-economy & sustainable technologies, and drug 
development and translational research, the purpose of which, among 
other things is to foster university-industry partnerships. The Oregon 
universities have been active in this field in the last decade.

          Since the Oregon Nanoscience and Microtechnologies 
        Institute (ONAMI) has been in existence, ONAMI has been able to 
        leverage State and federal resources for cutting edge research 
        and launch start-up companies such as HomeDialysis+ (a light-
        weight medical device that will allow patients with failing 
        kidneys to receive dialysis over night in their own homes).

          Research at Oregon Health & Science University has 
        been the basis of over 60 start-up companies, half of which 
        have been started since 2002.

          Oregon is unique in the creation of University 
        Venture Development Funds, by offering donors State tax 
        credits, which are paid back to the state through generation of 
        income resulting from commercialization of university research.

    All of these programs and activities, not only in Oregon, but 
across the country in different states reflect the impact of Bayh-Dole.

How has Bayh-Dole shaped University-Industry research collaborations?

    Federally funded research leverages a tremendous amount of 
investment into the research and development infrastructure. This 
occurs not only in the form of direct investment into research by non-
federal entities but ranges from investment into companies that are 
spun off and investment into products that are developed from licensed 
technologies.
    Bayh-Dole has encouraged the formation of productive university-
industry partnerships, especially in light of diminishing resources at 
all levels. The demise of corporate research laboratories has led to 
the increasing tendency of U.S. industry to look to universities to 
perform research that a decade or two ago industry was more likely to 
perform itself. Both companies and universities seek to leverage their 
respective expertise in science and product development to further 
advance respective goals. While AUTM does not directly track the number 
of industry-university research collaborations, the number of such 
research collaborations seems to be on the increase. While the absolute 
number of dollars spent on research at academic institutions has 
increased, the latest data indicate that the relative percentages from 
federal, industrial and non-federal sources have been relatively stable 
for the last decade [2]. At a time where the resources for research and 
development have not kept pace with need, it is important to recognize 
these cultural differences and arrive at pragmatic solutions that 
benefit both industry and universities. This represents a highly 
effective mechanism through which technology is transferred and not 
always in the form of patents and licenses.
    It is important to highlight at this point the differences in 
culture between academia and industry, and even within industry, 
variations in culture by industry cluster as well as by the size of a 
company and institutions. These cultural differences have led either to 
successful collaboration or complete breakdown of communication between 
respective participants [3]. A fundamental tenet of a university is the 
broad dissemination of knowledge through peer-review publications and 
education and training of students. Companies maintain a more secretive 
environment for their proprietary technologies and to ensure a return 
to their shareholders. University-industry partnerships in the field of 
biological or life sciences are most often highlighted as these 
products require significant investment by industry and remain visibly 
available for many years. In other fields where an exclusive position 
is less critical and product life cycles are measured in months, 
federally-funded research still plays a role as academic institutions 
transfer both knowledge and technology developed under federal funding.
    Any partnership which is based on economic incentives needs to be 
fair to the parties in that arrangement. It is therefore incumbent on 
both parties to recognize the synergies, differences, as well as 
activities that may be prohibited not only by federal statute, but also 
State laws and regulations and policies to arrive at mutually 
beneficial partnerships [5]. The Bayh-Dole Act, while significant, 
represents one of several pieces of legislation that plays a role in 
defining the interactions and relationships between academic and non-
profit research institutions and industry.

What is the possible effect of the increasing globalization of 
research?

    U.S. universities and companies increasingly function in a global 
environment. Both universities and companies have to therefore 
recognize additional cultural differences and address issues that arise 
from crossing international borders. These differences are also evident 
in dealing with local divisions of larger multinational companies which 
now have access to expertise and facilities on a global basis.
    Universities have traditionally fostered research collaborations 
both nationally as well as internationally. The issues of intellectual 
property development have not typically been a stumbling block in such 
collaborations. As other countries see the success of Bayh-Dole, they 
have increased their respective funding of basic research and 
implemented laws, regulations and policies that mimic Bayh-Dole in an 
effort to become successful in the innovation economy. Whereas in the 
U.S., federal funding for research has grown in the last decade, but 
has been flat over the last few years--increasing number of applicants 
for the same size pie--this is also true for industry based research 
funding at universities. This only serves to highlight the increasing 
amount of competition for limited research resources in the U.S.
    However, a large proportion of university-industry collaborations 
involve not large multinational companies, but more medium and small 
businesses that do not have the resources for international 
collaborations. For U.S. institutions, this means that actual barriers 
in collaborating with industry need to be reduced and perceived 
barriers need to be addressed in order to achieve success in this area.

How has Bayh-Dole influenced Basic Research?

    As indicated earlier, an AAAS study indicates that there is no 
significant impact of technology patents and commercialization on 
scientific research. This study surveyed respondents in the U.S., 
United Kingdom, Germany and Japan. This is true of collaborations, 
access to research tools and publications especially between academic 
institutions. Such interactions between institutions and industry are 
also commonplace, but usually proceed at a slower pace due to the 
differing cultures.
    Bayh-Dole in giving great impetus to technology transfer and to 
cultural changes on how best to utilize research results for the public 
benefit, providing some focus on the potential commercial applications 
derived from basic research. Most research results still get published 
without the need for review for patent protection. There is a small 
subset of research results that technology transfer staff as well as 
faculty are learning to recognize to have commercial potential that 
does get published after review, and if necessary after filing for 
appropriate protection. It is the intent of academic institutions to 
pursue commercialization of those research results for the public 
benefit, but not to obstruct others from doing research in the same 
field.

What changes in Bayh-Dole if any, may be appropriate as look to the 
next 25 years to promote commercialization of federally funded research 
and U.S. economic development?

    The Bayh-Dole Act fundamentally provides a simple structure that 
works as intended and should not be substantially altered. Further, 
Bayh-Dole offers greater opportunity to ensure that technology can be 
appropriately packaged and commercialized. If anything, this 
opportunity needs to be strengthened. There are numerous initiatives 
that are being implemented at the State and regional levels that are 
facilitating the transfer of federally funded research into commercial 
applications. A comprehensive look at such initiatives can be conducted 
to determine appropriate models for adoption. In addition, there are 
several outstanding technology transfer programs that have been 
successful that can provide information on creating infrastructure that 
leads to effective transfer. It must also be taken into accord that 
local, regional, and State stakeholders also play a significant role in 
the commercialization of federally funded research.
    Any development of programs that would augment Bayh-Dole should 
take into account such regional drivers, industry-academic institution 
cultural differences, resources allocated for technology transfer at 
institutions, education and training of technology transfer 
professionals as well as university faculty and staff, and appropriate 
metrics.
    One glaring weakness in the current law is the absence of effective 
Executive branch oversight. Congress made it clear that it expects for 
this function to be performed by an entity with both the policy 
background and clout to insure that federal agencies do not start 
interpreting the law on their own. We have noticed that the 
implementation of Bayh-Dole is increasingly uneven across federal 
agencies. The oversight authority has been moved over the years from 
the Office of Federal Procurement Policy to the Department of Commerce. 
It is now time to re-examine the current assignment of this oversight 
role since the Department of Commerce has now shown little interest in 
fulfilling this responsibility for many years and in fact recently 
abolished the office that previously had been assigned the oversight 
responsibilities. Without continued effective central oversight, 
agencies may tend increasingly to subordinate Bayh-Dole to individual 
policy and program priorities and objectives, thus weakening the 
ability to accomplish the broader Bayh-Dole goals, and we will de-
evolve back into the situation Congress passed Bayh-Dole to remedy: 
agencies developing their own patent policies to the detriment of the 
American public's health and future prosperity.
    One thought is that this oversight authority might be better 
implemented in the Office of Science and Technology Policy. While this 
makes sense in looking at the Executive branch organization chart, to 
really be effective what is really needed is having someone who 
understands the importance of Bayh-Dole at the helm.

General Conclusions

    Studies have found that universities are now drivers of regional 
economic development that encourages the development of technology 
based clusters which are important factors and may be attributable to 
Bayh-Dole. Many countries are now adopting Bayh-Dole type laws, as they 
see its successful implementation in the U.S. The benefits derived 
directly as well as indirectly from Bayh-Dole are extensive and should 
not be treated lightly due to a few anecdotal incidents.
    The primary missions of universities to maintain academic freedom 
to conduct research, educate and train students, and pursue and 
disseminate knowledge for the public benefit are protected by Bayh-
Dole. In the course of the last 25 years, universities have learned a 
tremendous amount on how to interact with industry. Universities are 
learning to recognize that relationships with industry are dynamic; 
vary with industry sectors; and, above all that we must adapt to 
changing environments as per the respective sectors. As I have 
indicated, the concerns of industry do not lie with the Bayh-Dole Act 
itself, but in the manner in which some universities have chosen to 
implement it, taking a narrow perspective on what defines technology 
transfer. In order to address this, several universities created, and 
the AUTM Board of Trustees and additional universities have endorsed, 
the ``Nine Points to Consider when Licensing University Technology.'' 
These points not only address licensing but can also be applied broadly 
to university-industry research relationships.
    While the Bayh-Dole Act allows universities to collect royalties 
from the licensing of subject inventions, the core mission of 
universities remains education and generation and dissemination of new 
knowledge. Some universities may focus purely on the licensing revenues 
to measure success of academic technology transfer, but the real impact 
is reflected in the impact on the lives of the American public. In 
addition, many inventions generate little revenue, and the amount of 
revenues that a particular university receives is usually minuscule 
compared to the size of that university's research budget. A part of 
the dissemination mission is to provide the information, whether it is 
in the form of education or in the form of technology transfer, to 
those who can best utilize it for the public benefit. Prior to Bayh-
Dole, this was primarily in the form of publications, and as we now 
know, it takes more. It has taken us over twenty-five years to get to 
this point, and we should not disrupt this trend. I, AUTM, as well as 
other organizations, believe that the Bayh-Dole Act will continue to be 
a catalyst for innovation in the U.S. economy for the next twenty-five 
years as well.

Acknowledgements

Janna C. Tom, Assistant Director, Policy, Analysis and Campus Services, 
        Office of Technology Transfer, University of California, Office 
        of the President; Vice President for Public Policy, AUTM

Joseph P. Allen, Vice President and General Manager, Intellectual 
        Property Management Group, West Virginia High Technology 
        Consortium Foundation

Howard Bremer, Emeritus Patent Counsel, Wisconsin Alumni Research 
        Foundation

Jon Soderstrom, Managing Director, Office of Cooperative Research, Yale 
        University; President-Elect 2007, AUTM

References

 1.  2004 AUTM Licensing Survey

 2.  2005 AUTM Licensing Survey

 3.  Summary Report PCAST Subcommittee on Federal Investment in Science 
& Technology

 4.  Intellectual Property Experiences in the United States Scientific 
Community: A Report by the Project of Science and Intellectual Property 
in the Public Interest, AAAS, 2007

 5.  Innovate America, December 2004, National Innovation Initiative 
Report, Council on Competitiveness.

 6.  Measuring the Moment: Innovation, National Security and Economic 
Competitiveness, The Taskforce on the Future of American Innovation, 
November 2006.

 7.  Better World Report, AUTM, 2006

 8.  Reports from the Field, AUTM, 2006

 9.  Better World Report: Part I: Building a Stronger Economy, AUTM, 
2007

10.  Better World Report: Part II: Technology Transfer Works, AUTM 2007

11.  Bayh-Dole Act: White Paper for Governor James E. Doyle, An 
Economic Engine for Wisconsin, 2004

Attachment:




                   Biography for Arundeep S. Pradhan

    Arundeep currently serves as Oregon Health & Science University's 
Director of Technology & Research Collaborations and has over 20 years 
of experience in technology transfer. He started his technology 
transfer career at the University of Utah.
    Arundeep has developed and implemented several programs for seed 
research funding, gap funding and business development such as the 
Innovation & Seed Fund (Oregon Health & Science University), 
Springboard for University Entrepreneurs and the Commercialization 
Opportunity Fund (Colorado State University Research Foundation) and 
Technology Innovation Grant (University of Utah). He currently 
participates in various programs and initiatives such as the Oregon 
Innovation Council and the Oregon University Research Council to align 
the interests of universities, city and State constituencies as to 
effectively achieve success in technology transfer objectives. In the 
past Arundeep has worked with groups in Colorado and Utah to achieve 
these objectives. He continues to work with local and State economic 
development agencies and industry groups to forge ties between these 
entities and the institution.
    As a member of AUTM (Association of University Technology Managers) 
and LES (Licensing Executive Society), Arundeep has participated in and 
moderated workshops on a variety of topics relating to technology 
transfer. Arundeep served on the AUTM Program and Survey Committees 
from 1993-1997. He was the Program Chair and Co-Program Chair for the 
AUTM Western Region Meeting in 2000 and 2001 respectively. More 
Recently, Arundeep was the Program Chair for the AUTM Annual Meeting in 
2004 and 2005, which had record numbers in attendance. He is also the 
current Vice President for Annual Meeting and the Board of Trustees for 
AUTM (2007 & 2008).
    Arundeep currently serves on the Board of the Oregon Bioscience 
Association and as an observer on the Board of several university 
research-based start-up companies. In the past he has served on the 
Oregon Council for Knowledge and Economic Development (2004-2005), the 
Board and the Managing Committee on the Colorado BioScience Association 
(2002-2004) and the Board for the Western Institute for Biomedical 
Research (1997-1999).

    Chairman Wu. Thank you, Mr. Pradhan. Dr. Butts.

  STATEMENT OF DR. SUSAN B. BUTTS, SENIOR DIRECTOR, EXTERNAL 
   SCIENCE AND TECHNOLOGY PROGRAMS, THE DOW CHEMICAL COMPANY

    Dr. Butts. Chairman Wu, Ranking Member Gingrey, and Members 
of the Subcommittee, it is my privilege to address you on the 
topic of Bayh-Dole, the next 25 years. My name is Susan Butts, 
and I am the Senior Director of External Science and Technology 
Programs at The Dow Chemical Company. My group oversees, does 
external research collaborations around the world. I am also 
the Vice President of the University-Industry Demonstration 
Partnership, an organization operating under the auspices of 
the Government-University-Industry Research Roundtable, which 
is in the National Academies.
    The Bayh-Dole Act is an important and pivotal piece of 
legislation that has produced many benefits. However, as you 
consider the next 25 years of Bayh-Dole, there are three key 
points to keep in mind. First, although the Bayh-Dole Act has 
enabled the licensing of federally funded technology from 
universities to industry, it has also created expectations for 
control of intellectual property that actually discourage 
research collaborations with industry.
    Second, most foreign universities offer companies much more 
favorable rights to intellectual property arising from the 
research that they fund. This is causing companies to do more 
of their university research collaborations abroad. Both of 
these trends could have an adverse impact on U.S. 
competitiveness, since they will diminish U.S.-based 
collaborations, which can generate new knowledge, technologies, 
business opportunities, and jobs.
    Third, small changes in the Bayh-Dole Act, and tax 
regulations to clarify the intent of Congress relative to the 
treatment of inventions resulting from industry-funded 
research, could significantly improve the climate for 
university-industry research partnerships in the United States.
    I am sure that we will hear many different points of view 
in today's hearing. The important issue is not whether Bayh-
Dole is good or bad, but rather, that it has taken the U.S. 
down a path that has diverged from most of the rest of the 
world, in terms of university-industry interactions. Some 
aspects of this path have been very beneficial. Other aspects 
have been detrimental. The challenge for our Nation is to put 
the United States on a new path that will fully engage our vast 
technology resources from industry, universities, and National 
Laboratories, to maximize U.S. competitiveness in technology 
and innovation.
    Innovation is the translation of ideas into products. It 
happens in different ways and different technologies and 
industries. In my written testimony, I have tried to reflect 
issues and concerns that are broadly held across industries, 
but we should keep in mind that there are important 
differences. In industries like pharmaceuticals and chemicals, 
innovation is a discrete, long, and costly process. Products 
have a long lifetime, and business success is gained through 
exclusive access to key patent protected products and 
processes. In industries like information technology, 
innovation is a rapid, continuous process. Each product 
embodies many technologies and devices, products have a short 
lifetime, and business success is gained through rapidly 
getting the next product to market.
    Pharmaceuticals and information technology define two ends 
of the innovation spectrum for technology-intensive industries. 
In order for university-industry collaborations to be 
productive and mutually beneficial, they must be flexible 
enough to accommodate the whole innovation spectrum. 
Globalization is a reality. U.S.-based companies must compete 
effectively in the global marketplace in order to stay in 
business.
    Globalization also brings home the responsibility that 
government, industry, and universities share to solve the most 
serious challenges facing mankind, that know no national 
boundaries. Challenges like climate change and sustainable 
energy, food, and water. My employer, The Dow Chemical Company, 
has committed to meeting corporate sustainability goals to help 
address these challenges. We will have to make significant 
technology breakthroughs to meet these goals, and we want to 
partners with the best university researchers to do this. 
Unfortunately, the barriers that we experience in working with 
U.S. universities often cause us to seek out research partners 
with universities in other parts of the world.
    I believe that the Bayh-Dole Act is fundamentally sound 
with regard to its stated purposes, but has gotten off-track in 
implementation, primarily through misapplication to research 
that is privately funded rather than government funded. This 
causes U.S. universities to impose their rights and obligations 
under Bayh-Dole to research that is funded by industry profits 
rather than taxpayer dollars.
    Clarification of the intent of Congress, and the laws and 
regulations that impact industry funded research at 
universities, could greatly enhance the flexibility that both 
parties have in dealing with foreground intellectual property, 
could speed the process to negotiate research agreements, and 
thus, foster more university-industry partnerships in the 
United States.
    Thank you for your attention, and I would welcome 
questions.
    [The prepared statement of Dr. Butts follows:]

                  Prepared Statement of Susan B. Butts

    Chairman Wu, Ranking Member Gingrey, and Members of the 
Subcommittee, it is my privilege to address you on the topic of Bayh-
Dole--The Next 25 Years. My name is Susan Butts, and I am the Senior 
Director of External Science and Technology Programs at The Dow 
Chemical Company. My group oversees all of Dow's research 
collaborations with universities, independent laboratories, government 
laboratories, and government agencies around the world. Dow is the 
second largest chemical company in the world, and we spend over one 
billion dollars every year on research. Most of that funding is spent 
on internal programs but we also support almost 200 external sponsored 
research collaborations, research grants, and research consortium 
memberships. I am also the current Vice President of the University-
Industry Demonstration Partnership, an organization operating under the 
auspices of the Government-University-Industry Research Roundtable 
which is in the National Academies.
    There are three key points that I would like to make. First, 
although the Bayh-Dole Act has enabled the transfer of technology 
developed with federal funds from U.S. universities to industry it has 
also contributed to a contentious climate around the issue of 
intellectual property (IP) rights which discourages research 
collaborations between industry and U.S. universities. Second, most 
foreign universities, which do not have the IP expectations created by 
Bayh-Dole, allow industry research sponsors to own or control 
inventions resulting from the research that they fund. This much more 
favorable treatment of IP is causing companies to do more of their 
sponsored research abroad. Both of these trends will have an adverse 
impact on U.S. competitiveness since they will diminish U.S.-based 
collaborations which can generate new knowledge, technologies, and 
business opportunities. Third, small changes in the Bayh-Dole Act and 
tax regulations to clarify the intent of Congress relative to ownership 
or control of intellectual property resulting from industry-sponsored 
research could improve the climate for university-industry research 
partnerships in the United States.
    The Bayh-Dole Act is an important and pivotal piece of legislation. 
It has successfully accomplished one of its primary stated purposes--to 
promote the commercialization of federally funded university research. 
There has also been, however, a negative and unintended consequence. 
Namely, that U.S. universities, in stark contrast with most foreign 
universities, have become substantially less attractive as research 
partners for companies. As U.S. universities increasingly focus on 
controlling intellectual property and maximizing their revenues from 
licensing inventions they have become more like competitors than 
partners to companies that sponsor research with their faculty and 
students. This is occurring at a time when global scientific 
challenges, such as climate change, renewable energy, health, and 
nutrition require collaboration like never before.
    In 1980 when the Bayh-Dole Act was passed the Federal Government 
was the main source of funding for research and development in the 
United States so research partnerships with companies were neither 
common nor necessary for universities. Universities published their 
research results and companies used the published information to assist 
their internal research programs. Now, however, industry spends twice 
as much on research and development as the Federal Government so 
industry could be a significant source of research funding for 
universities (Figure 1).[1] More importantly, such research 
collaborations would benefit the U.S. economy by speeding the 
development of new products that draw on both company and university 
technology and capabilities. This is unlikely to happen, however, as 
long as companies and universities are at odds on how to treat 
intellectual property that comes from company-sponsored research. 
Although the amount of university research funding from companies has 
grown steadily over the last 25 years it still represents a small 
percentage of the total received by U.S. universities (Figure 2).[1] In 
a speech given in the fall of 2006 Dr. John Marburger, Director of the 
Office of Science and Technology Policy, made the following observation 
about the necessity of looking beyond the Federal Government to find 
sufficient funding to sustain U.S. university research: ``More likely 
in the foreseeable future is an increasing intensity of competition for 
a large and expanding but finite federal research fund by a growing 
number of research capable universities. . .. More promising is the 
prospect of increasing the share of research funding contributed by the 
states and by the private sector, particularly by industries that 
benefit from technologies that build on the scientific products of the 
universities. Unlike the Domestic Discretionary budget, the assets of 
the private sector do grow with GDP, and industrial investment in R&D 
has consequently increased much more rapidly than the federal 
contribution.''[2]




Impact of Bayh-Dole

    Bayh-Dole recognized a fundamental reality--that companies are the 
primary engine for technology commercialization and the primary channel 
for getting new products to market for the benefit of society. Neither 
the government nor universities can or should fulfill those roles. So, 
in order to develop nascent inventions from the university and deliver 
them as new products to the market place companies are an essential 
partner. By giving universities the right to take title to inventions 
from federally funded research and the obligation to try to 
commercialize those inventions through licensing, the Bayh-Dole Act 
provided the legal framework to facilitate the transfer of technology 
from universities to industry. This has undoubtedly benefited the 
United States. Since universities were allowed to set licensing fees 
and royalties and to keep all the licensing revenue Bayh-Dole also 
created the expectation that universities should control intellectual 
property and generate income from their inventions. As financial 
pressures on universities have increased the prospect of filling the 
funding gap through licensing revenue is very attractive. However, 
although licensing income has grown steadily as university technology 
transfer offices have licensed significant numbers of inventions, the 
total net licensing revenues reported by universities to the 
Association of University Technology Managers are not sufficient to 
fill the research funding gap. In fact, the licensing income is only 
about one third of the total research funding that the same 
universities are receiving from industry (Figure 3).[3] Thus, it seems 
that the best interests of the universities will not be served by 
trying to increase licensing revenue at the expense of research funding 
from industry.




Influence of Bayh-Dole on University-Industry Research Collaborations

    Bayh-Dole has undoubtedly fostered some university-industry 
collaborations but it has had the unintended consequence of impeding 
many more.
    Bayh-Dole has enabled licensing transactions and some new research 
to support the transfer of the inventions. For instance, when a company 
licenses a university invention that resulted from federal funding it 
may choose to engage the faculty inventor in follow-on research to 
further develop or refine the invention for commercial practice. This 
is more likely to happen when the licensee is a small company with 
limited internal research and development capabilities.
    Bayh-Dole has not, however, fostered research partnerships--those 
in which a company is not seeking to license an existing university 
invention but, rather, to engage a faculty member and his or her 
students to perform research of interest to the company. In those 
research partnerships the company provides the funding for the research 
(including university overhead), frames the research problem, and may 
provide other resources to the university project such as company-
generated research or testing results, proprietary technical, business 
or market information, non-commercial samples or prototypes, access to 
company facilities, and consultation with company researchers. In 
return, the faculty member and student(s) have an interesting real-
world research problem to work on and usually the right to publish the 
research results. These company-sponsored projects thereby support the 
educational, research, and information dissemination missions of the 
university.
    There is a fundamental difference between federally funded research 
and company funded research. In the former case the funding comes from 
tax dollars so it is reasonable to promote a use of resulting 
inventions in a manner that generally benefits society. That societal 
benefit comes in two ways: invention licensing income provides 
financial support for the university and successful commercialization 
of inventions brings new products to the public. The university, the 
licensee, and tax payers all benefit. In the latter case, that of 
company sponsored research, the research funding comes from the 
company's owners or shareholders and not U.S. taxpayers in general. 
Company profits pay for the research investment, and company owners/
shareholders expect this investment to produce a return which generally 
comes from a competitive advantage for its products in the market 
place.
    U.S. universities have taken the position that virtually all 
privately sponsored research is at least ``touched'' in some way by 
federal funds and, therefore, subject to the Bayh-Dole Act. By this 
reasoning it then follows that the university, not the sponsor, should 
own and control any inventions resulting from the sponsored research 
and that the university should be free to license these inventions as 
it sees fit. This very broad interpretation seems to be in conflict 
with both the stated intention of the Act and the language of the 
implementing regulations. In fact, the policy and objective section of 
the Bayh-Dole Act lists, among others, the following two objectives: to 
promote collaboration between commercial concerns and nonprofit 
organizations, including universities and to promote the 
commercialization and public availability of inventions made in the 
United States by United States industry and labor.[4] The section of 
the implementing regulation which defines its scope states: ``To the 
extent that a non-government sponsor established a project which, 
although closely related, falls outside the planned and committed 
activities of a government-funded project and does not diminish or 
distract from the performance of such activities, inventions made in 
performance of the non-government sponsored project would not be 
subject to the conditions of these regulations. An example of such 
related but separate projects would be a government sponsored project 
having research objectives to expand scientific understanding in a 
field and a closely related industry sponsored project having as its 
objectives the application of such new knowledge to develop usable new 
technology.''[5]
    Before beginning a company-sponsored research project the 
university and sponsor generally execute a research agreement that, 
among other things, determines how any inventions that may occur will 
be treated. As mentioned above U.S. universities generally claim 
ownership of inventions made by their faculty and students in the 
course of performing research sponsored by a company. The research 
agreement terms typically offered by U.S. universities give the sponsor 
a time-limited option to negotiate a license for the invention and 
require the research sponsor to pay patenting costs. The sponsor has to 
pay for the research and pay for the patenting without any guarantee 
that it can obtain a license at a reasonable cost. In fact, if the 
sponsor and university cannot reach agreement on the value of the 
invention and licensing terms then the university is free to license 
the invention to another company, even a competitor of the research 
sponsor. This is indeed a ``nightmare scenario'' for the company 
sponsoring the research because, although it framed the research 
problem and paid for the research activity, the resulting invention 
could give a competitive advantage to its competitor! Because of these 
risks and uncertainties many companies hope that no inventions result 
from their sponsored research at U.S. universities. This is an 
unfortunate situation since it limits the scope of the research 
partnerships and the potential benefit from them, for all parties.
    For industries like my own (the chemical industry) patents are 
critical to business success. The cost of taking an invention from 
concept to commercial product is very high and the probability of 
success is low. It is not unusual for development and commercialization 
to take 10 to 15 years. Construction of a world-scale chemical plant 
costs hundreds of millions of dollars. Products and plants have a long 
life cycle. Most chemical companies are unwilling to make such a large 
investment unless they have the protection provided by ownership or 
exclusive control of the supporting product and process patents. They 
are also unwilling to make these investments if their licensing fees 
and royalty obligations make the profit margins too low.

Effects of the Increasing Globalization of Research

    Global competition is an inevitable consequence of capitalism and 
free trade, two of the foundations of the U.S. economy. U.S. companies 
must produce products that are better or less expensive than those 
produced by competitors in order to stay in business. U.S. companies 
also want to access to foreign markets in order to grow. These and 
other factors, (fast, reliable, and inexpensive global 
telecommunications and air travel to name a few) have led U.S.-based 
companies to expand their research, manufacturing, and marketing assets 
abroad. This expansion leads naturally to the establishment of research 
partnerships with universities located in the same regions as the 
company's research or manufacturing facilities.
    At the same time companies are finding that research partnerships 
with foreign universities offer a distinct advantage with regard to 
intellectual property use. Most foreign universities, in both the 
developed and developing world, readily provide the research sponsor 
with exclusive or controlling access to inventions resulting from the 
research. Such exclusivity comes through a variety of treatments of 
inventions ranging from outright assignment of ownership to the sponsor 
to joint ownership to granting of an exclusive license. In most cases, 
the exclusive access is provided in return for payment of the cost of 
the research and the cost of obtaining the patent. In some cases, the 
company sponsor pays an additional, modest, predetermined fee.
    Figures 4 and 5 provide data to support the observation that 
foreign universities provide more favorable intellectual property terms 
to research sponsors. In 2003 Dow compared the intellectual property 
terms from more than one hundred sponsored research agreements between 
Dow and universities around the world. Figure 4 shows that in 69 
percent of agreements with U.S. universities the university took title 
to sole inventions (those made by faculty or students in the course of 
performing the research sponsored by Dow). In contrast, Figure 5 shows 
that in 85 percent of agreements with foreign universities sole 
university inventions were assigned to Dow or Dow was made a joint 
owner.




    It has also been Dow's experience that it is much faster and easier 
to negotiate a research agreement with foreign universities. Not only 
does this allow research projects to get started in a timely manner but 
it also reduces the transactional costs associated with the 
negotiation. In 2002 Dow measured the average cycle time for executing 
a research agreement with U.S. universities. We found that, on average, 
it took over five months from the time that the Dow researcher and 
faculty member finalized the research plan until both parties signed 
the research agreement. The most time-consuming step was negotiating 
the intellectual property terms. In some cases we were not able to 
reach an agreement, and we just walked away from the project. In 
contrast, when we set up agreements with universities outside the U.S. 
most negotiations were quite fast and easy, being completed in a few 
weeks rather than many months.
    The high quality of research being performed at many universities 
outside the U.S., the favorable intellectual property terms that these 
same institutions offer to research sponsors, and the relative speed 
and ease of negotiating the supporting research agreements makes it 
increasingly attractive for companies in the U.S. to set up more of 
their research partnerships with universities abroad. At a recent 
meeting of the External Technology Directors Network, a working group 
within the Industrial Research Institute, members of the network 
conducted a straw poll to find out whether member companies were, 
indeed, increasing the amount of their sponsored research being done 
abroad.[6] Of the 23 companies represented at the meeting 17 responded 
that they are doing more of their sponsored research with foreign 
universities than they did in the past. Of the 17 who responded in the 
affirmative, nine agreed that either better intellectual property terms 
and/or ease of negotiating the agreements were major reasons for their 
decision to do more work with foreign universities.

Influence of Bayh-Dole on Academic Collaborations and the Broad 
                    Dissemination of Knowledge

    Bayh-Dole has had both positive and negative influences on academic 
collaborations and dissemination of information. Academic 
collaborations are fostered by the fact that all universities have 
clear and equal standing with regard to their faculty's inventions that 
come from collaborations in which each party receives funding directly 
from the Federal Government. The situation is more complicated when 
there are joint inventions or when funding flows from one university to 
another since each party strives to maximize its rights to intellectual 
property.
    Perhaps the most serious impediment to academic collaboration 
occurs when a university fails to make research results or materials 
available to the rest of the research community. Material transfer 
agreements between institutions have become very difficult to 
negotiate. Some universities have elected to patent and license 
research tools that result from federally funded research. It is hard 
to make a compelling argument that society is better served by limiting 
access of the research community to research tools developed with 
federal funding. Such tools have a limited number of potential users in 
the research community and don't have to be commercialized in order to 
be useful. Patent protection is not needed because little or no 
investment is required to make the tools available for others to use. 
Putting research tools into the public domain satisfies the intent of 
the Bayh-Dole Act with regard to public benefit. Generating income and 
limiting access appear to be the main reasons for universities to 
patent and license research tools.[7]

Changes in Bayh-Dole Legislation Needed to Promote U.S. Economic 
                    Development

    U.S. competitiveness and, hence, U.S. economic development will be 
adversely impacted if no improvements are made in the climate for 
university-industry research and development partnerships. The U.S. 
economic engine cannot be fully engaged and functional if the three 
main components of the technology enterprise (Industry, Universities, 
and Government Laboratories) do not work together effectively to 
investigate science and translate technology into new products. U.S. 
companies with technology-based products will do more and more of their 
research collaborations with foreign universities. The potential impact 
on U.S. competitiveness of such a shift is well described in the report 
from The National Academies, Rising Above the Gathering Storm.[8] Many 
individuals and organizations, such as the University-Industry 
Demonstration Partnership, are working to lower the barriers to 
research collaborations between universities and companies in the U.S. 
but there are still some practices and expectations regarding 
intellectual property as well as some statutory and regulatory issues 
that are problematic.
    The Bayh-Dole Act, largely through misinterpretation or 
misapplication, is offered as one of the main reason why universities 
must own inventions resulting from company-sponsored research and 
should have the freedom to license these inventions as they choose. 
This problem could be mitigated by the addition of language which 
further clarifies the intent of Congress relative to university 
research supported with private, rather than government, funding. In 
particular, clarification of circumstances under which private and 
federal funding of related research can exist simultaneously without 
Bayh-Dole rights and obligations being triggered would be very helpful. 
It would also be very helpful to change some of the tax code 
provisions, mainly Revenue Procedure 97-14 (recently superseded by 
Revenue Procedure 2007-47) which creates a safe harbor for universities 
relative to their tax-exempt bonds only as long as they do not give 
preference in licensing foreground inventions to an industry sponsor of 
research. Finally, some of the economic pressures on universities which 
cause them to try to maximize their licensing revenue could be relieved 
by raising or eliminating the federal cap on overhead rates.
    Although the focus of today's hearing is on how Bayh-Dole has 
affected university-industry relations it is worthwhile to remember 
that Bayh-Dole also applies to companies that receive research funding 
directly from government agencies. A white paper prepared by the 
Integrated Dual-use Commercial Companies (IDCC) organization makes the 
following observations and recommendations:[9] ``Several aspects of the 
Bayh-Dole Act represent major barriers preventing most technology rich 
commercial companies from even considering performing R&D with the 
Government when there could be laboratory developments with Government 
funding with significant commercial application. Some of the concerns 
raised regarding the Bayh-Dole Act include the inability to keep a 
patentable invention a trade secret, the breadth of the Government-
purpose license, march-in rights, and the broad definition of ``subject 
invention,'' which includes inventions conceived (and possibly even 
patented) prior to entering into the funding agreement, but first 
actually reduced to practice under the funding agreement. Other 
concerns are the mandatory disclosure, election and filing requirements 
for subject inventions, which can potentially result in forfeiture of 
title to the inventions if the requirements are not timely followed. An 
additional concern is the Preference for U.S. Industry requirement, 
which prohibits the contractor from granting an exclusive license to 
use or sell a subject invention in the U.S. unless the licensee agrees 
that any product embodying the subject invention will be substantially 
manufactured in the U.S. These concerns have resulted in 
recommendations from both Government and industry that they be 
addressed.''[10]
    ``Most of these industry concerns could be simply addressed by 
amending Section 35 U.S.C.  210(c) to provide that if a funding 
agreement is made with a contractor that is subject to the Bayh-Dole 
Act (35 U.S.C.  200-212), any rights of the Government or obligations 
of the contractor relating to patents described in 35 U.S.C.  202-
204, may be negotiated between the Government and the contractor to 
reduce such Government rights or contractor obligations, if the head of 
the contracting activity determines that the interest of the Government 
and the general public will be served thereby. This same right to 
negotiate reduced Government rights or reduced contractor obligations 
relating to patents would apply to those contractors that are large 
businesses and that are subject to the Statement of Government Patent 
Policy issued on February 18, 1983.''[11]
    In summary, the Bayh-Dole Act is an important piece of legislation 
that has produced many benefits. The unintended negative impact on 
research collaborations involving industry, universities and government 
can be mitigated through relatively minor changes in the law and 
related regulations.

References and Notes

 1.  National Science Board, Science and Engineering Indicators 2004, 
published by the National Science Foundation.

 2.  J. Marburger in a speech to the Council on Governmental Relations, 
Washington, D.C., October 26, 2006 on the topic of Emerging Issues in 
Science and Technology Policy.

 3.  From data in the AUTM Licensing Survey--Fiscal Year 2004, 
published by the Association of University Technology Managers.

 4.  See 35 U.S.C.  200.

 5.  See 37 C.F.R. 401.

 6.  From a meeting of the Industrial Research Institute (IRI)-External 
Technology Directors Network (ETDN), Fort Lauderdale, FL, April 19-20, 
2007.

 7.  See, for example, R. Eisenberg, Science, 299, 1018-1019 (2003).

 8.  N. Augustine et al., Rising Above the Gathering Storm: Energizing 
and Employing America for a Brighter Economic Future, The National 
Academies (2005).

 9.  IDCC, Integrated Dual-use Commercial Companies, was formed in 1991 
by major commercial firms dedicated to improving the efficiency and 
effectiveness of Federal Government procurement and R&D interaction 
with commercial firms. For additional information on IDCC see 
www.idcc.org

10.  See Diane M. Sidebottom, Updating the Bayh-Dole Act: Keeping the 
Federal Government on the Cutting Edge, 30 Pub. Cont. L. J. 225 (Winter 
2001); Richard N. Kuyath, Barriers to Federal Procurement: Patent 
Rights, 36 the Procurement Lawyer I (Fall 2000). Diane M. Sidebottom, 
Intellectual Property in Federal Government Contracts: The Past, The 
Present, and One Possible Future, 33 Pub. Cont. L. J. 63 (Fall 2003).

11.  Corresponding changes for large business concerns would need to be 
made to the organic patent statutes applicable to DOE and NASA, 42 
U.S.C. 2011, et seq. (DOE), 42 U.S.C. 5901-5915 (DOE), 42 U.S.C. 2451-
2459 (NASA) and 42 U.S.C. 2471-2476 (NASA).

                      Biography for Susan B. Butts

    Dr. Susan Butts is Senior Director of External Science and 
Technology Programs at The Dow Chemical Company. In this capacity she 
is responsible for Dow's contract research activities with U.S. and 
European government agencies and sponsored research programs at over 
150 universities, institutes, and national laboratories worldwide. She 
also holds the position of Global Staffing Leader for R&D, with 
responsibility for recruiting and hiring programs.
    Dr. Butts is active in a number of organizations that address 
issues pertaining to relationships between industry, universities, and 
government research laboratories. She is currently a Dow representative 
to the Council for Chemical Research, the American Chemical Society's 
Committee on Corporation Associates, and the Industrial Research 
Institute (IRI). She is also a member of the National Council of 
University Research Administrators (NCURA), the Association of 
University Technology Managers (AUTM), the American Association for the 
Advancement of Science, and Sigma Xi. Dr. Butts currently serves on the 
governing boards for the Council for Chemical Research and the Alliance 
for Science and Technology Research in America (ASTRA). She was a co-
founder and member of the Steering Team for the University-Industry 
Partnership Project, an effort sponsored by the Government-University-
Industry Research Roundtable (GUIRR) of the National Academies, NCURA 
and IRI with the goal of lowering the barriers to industry sponsored 
research at universities. This project led to the creation of a new 
organization, the University-Industry Demonstration Partnership (UIDP), 
which operates within GUIRR. Dr. Butts is the Vice President of the 
UIDP and will be President in 2008.
    Dr. Butts holds a B.S. in chemistry degree from the University of 
Michigan and a Ph.D. degree in organometallic chemistry from 
Northwestern University. Before joining the External Technology group 
Dr. Butts held several other positions at Dow including Senior Resource 
Leader for Atomic Spectroscopy and Inorganic Analysis within the 
Analytical Sciences Laboratory, Manager of Ph.D. Hiring and Placement, 
Safety and Regulatory Affairs Manager for Central Research, and 
Principal Investigator on various catalysis research projects in 
Central Research.

    Chairman Wu. Thank you very much, Dr. Butts. Mr. Johnson, 
please proceed.

 STATEMENT OF MR. WAYNE C. JOHNSON, VICE PRESIDENT, WORLDWIDE 
         UNIVERSITY RELATIONS, HEWLETT-PACKARD COMPANY

    Mr. Johnson. Good afternoon, Mr. Chairman and distinguished 
Members of the Committee. Thank you for the opportunity to 
speak with you today on the subject of Bayh-Dole, the next 25 
years.
    I am Wayne Johnson, Vice President of University Relations, 
Worldwide, from Hewlett-Packard Company. My focus is on 
bringing universities and industry together to work 
collaboratively, for mutual benefit and for our innovation 
system.
    I have been working in this area for over 20 years, 
representing companies such Raytheon, Microsoft, and now 
Hewlett-Packard. For the past three years, I have been working 
on the cross-industry, cross-university efforts at GUIRR, the 
Government University Industry Research Roundtable, part of the 
National Academies here in Washington. I have been leading one 
of the efforts at BASIC, the Bay Area Science and Innovation 
Consortium in California, and I am a founding sponsor of the 
UIDP, the federal University Industry Demonstration 
Partnership, also here in Washington. The goal of these efforts 
has been to remove the barriers that prevent universities and 
industry from working together, and to understand deeply the 
partnership models and operating parameters that will work 
successfully, given the myriad of challenges that both parties 
face.
    Personally, I care deeply about U.S. universities and their 
ability to work with industry. I believe that ability of these 
two types of partners to come together around important 
problems and interesting research areas is a very important 
part of our future, and our ability to be successful and to 
lead the world in innovation.
    Now, you can hear me. I have three key points and two 
recommendations for you to consider. First, my key points.
    My first point is that the information technology or IT 
industry does not believe in ``home run patents.'' Last week, 
one of my colleagues went to a nearby office supply store, and 
purchased an HP Color printer, color copier, scanner, and photo 
printer all in one for $79.99. Today's products, such as PCs, 
PDAs, printers, and cell phones, et cetera, are sophisticated, 
complex aggregations of hardware, software, systems, and 
services. Each one contains literally hundreds of patented 
concepts and implementations. And yet, no single concept or 
implementation makes or breaks the success of the product. Each 
key concept can be designed around or implemented differently. 
Therefore, the sort of home run patents, which have high 
commercial value, rarely exist, and do not drive innovation in 
the IT industry.
    My second point is, one of the key original goals of the 
Bayh-Dole legislation was to ``promote collaboration between 
industry and universities.'' I am here to tell you today that 
unfortunately, it has had the opposite effect. One of my 
research colleagues has told me at HP Labs that he has been 
able to set up research collaboration with elite universities 
in Russia within a few days and just a few phone calls. Our 
experience in negotiating collaborative agreements with U.S. 
universities is that it can take as long as two years or more, 
if indeed, we ever reach such an agreement over IP rights. 
These types of situation have led to what we call a silent 
breaking, where many companies in our industry simply walk 
away, because it is too costly and takes too long to reach an 
agreement.
    My third point is that while intellectual property rights, 
patents, and strong IP position have been critical to our 
success in the past, it is innovation and collaboration, 
together with strong relationships and interactions between 
U.S. universities and industry, that will drive our future 
success.
    Our success depends on the ability of universities to 
cultivate and develop world class talent through high quality 
education of students, and this, in turn, depends on the 
relevant and challenging educational experiences between 
universities and industry. The shift away from collaboration is 
one of the reasons why the silent breaking represents such a 
threat to our long-term success in the IT industry and to the 
health of our innovation system in the United States. And Bayh-
Dole in its present form does not address the particular issue 
of interaction, collaboration, and strong relationships.
    Here are my two recommendations. My first recommendation is 
that we don't feel that Bayh-Dole should be changed, for two 
reasons. Bayh-Dole provides IP protection for industry and 
business models that depend on a few enabling key patents for 
competitive advantage, and as has been mentioned previously, 
certainly in the pharmaceutical industry. It also establishes a 
uniform approach to ownership and licensing of intellectual 
property, superior to the IPA process that it replaced.
    In addition, my second recommendation is to launch a new 
focus on innovation, one that makes this country a hotbed of 
collaboration, one that highlights the differences between 
invention and innovation, and that understands that superior 
value can be created through innovation, one that enacts 
policies to bring innovation to the forefront, both for our 
industry's success and America's success for the next 25 years. 
When we look into the future from an IT company perspective, we 
believe that the focus on patents will wane over time, and many 
of the things that drive innovation, from our experience, are 
in the details, and those details are not about technology 
licensing.
    Thank you for your attention and the opportunity to testify 
here today.
    [The prepared statement of Mr. Johnson follows:]

                 Prepared Statement of Wayne C. Johnson

Introduction

    Good afternoon Mr. Chairman and distinguished Members of the 
Committee. Thank-you for the opportunity to speak with you today on the 
subject of ``Bayh-Dole--The Next 25 Years.''
    I'm Wayne Johnson, Vice-President of University Relations, 
Worldwide, from Hewlett-Packard Co. My focus is on bringing 
universities and industry together to work collaboratively, for mutual 
benefit and for our innovation system.
    I've been working in this area for over 20 years, representing 
companies such as Raytheon, Microsoft, and now Hewlett-Packard. For the 
past three years, I've been working on the cross-industry, cross-
university efforts at GUIRR (the Government University Industry 
Research Roundtable), part of the National Academies here in 
Washington. I've been leading one of the efforts at BASIC (the Bay Area 
Science and Innovation Consortium in California), and I'm a founding 
sponsor of the UIDP (the federal University Industry Demonstration 
Partnership, also here in Washington.) The goal of these efforts has 
been to remove the barriers that prevent universities and industry from 
working together, and to understand deeply the partnership models and 
operating parameters that will work successfully, given the myriad of 
challenges that both parties face.
    Personally, I care deeply about U.S. universities and their ability 
to work with industry. I believe that ability of these two types of 
partners to come together around important problems and interesting 
research areas is a very important part of our future, and our ability 
to be successful and to lead the world in innovation.

Outline of Key Points and Recommendations

Key Points
    Before getting into the details of my testimony this afternoon, 
there are three key points and two recommendations that I'd like for 
you to consider.
    Please note the opinions expressed here are from an information 
technology industry perspective, and are not intended to reflect the 
issues and concerns of other industries such as Life Sciences, etc., 
which we understand to have very different needs.

1.  We in the information technology (``IT'') industry do not believe 
in ``Home-Run'' Patents

          Today's products are sophisticated, complex 
        aggregations of software, systems and services (such as the 
        personal computer, PDA or cell phone)

          Each one contains literally hundreds of patented 
        concepts and implementations

          Yet no one concept or implementation ``makes or 
        breaks'' the success of the product

          ``Home-Run'' patents do not drive innovation in the 
        IT industry

2.  One of the key, original goals of the Bayh-Dole legislation was. . 
.to promote collaboration between industry and universities. . .

          Unfortunately, it has had just the opposite effect of 
        what was intended

3.  While intellectual property (IP) rights, patents, and a strong IP 
position have been critical to our success in past,

          It is innovation, collaboration, and strong 
        relationships and interactions between U.S. universities and 
        industry that will drive our future success

          And Bayh-Dole, in its present form, does not address 
        the particular issues of interaction, collaborations, and 
        strong relationships

Recommendations

1.  At this time, we recommend that Bayh-Dole not be changed.

          Bayh-Dole provides IP protection for industries and 
        business models that depend on a few enabling patents for 
        competitive advantage

          It also establishes a uniform approach to the 
        ownership and licensing of intellectual property, far superior 
        to the IPA process that it replaced

2.  In addition, we recommend a new focus on innovation--one that makes 
this country a ``hot-bed'' of collaboration

          One that distinguishes the differences between 
        invention and innovation, and that understands the superior 
        value that can be created through innovation

          And one that enacts policies to bring innovation to 
        the forefront, both for our industry's success and for 
        America's success during the next 25 years

          When we look into the future from the IT industry 
        perspective, we believe that the focus on patents will wane. 
        Many of the things that drive innovation, from our experience, 
        are in the details, and those details are not about technology 
        licensing.

Innovation & the IT Industry Perspective

    The information technology (``IT'') industry has followed a unique 
evolution throughout the past five decades.
    Initially, the efforts of university researchers and companies were 
largely decoupled, with universities focusing on basic research, and 
companies working to develop ``stand-alone'' products. Innovation 
efforts were typically focused on creating technologies that would 
enable new categories of products, such as printers, calculators, 
computers, etc.
    As technology advanced and products grew more sophisticated in 
their capability, the focus of innovation moved to combining these 
products into systems. An example of such a system is the personal 
computer which integrates processors, memory, and video into an 
extremely useful, powerful, and low-cost system.
    And as these systems became more advanced, they became linked 
together into networks, creating a widely available information 
infrastructure. The emphasis in innovation is now on how to create 
services that make sophisticated tasks both possible and pervasive, 
creating a whole new wave of communication and information capabilities 
enabling the Internet, cell phones, iPods, etc.
    Innovation in today's world requires the combined efforts of 
multiple companies, partnering across multiple industries to bring a 
competitive offering to the customer. Even the seemingly simple printer 
shown here involves multiple research disciplines and numerous sciences 
in its creation, design, and development.




    In this new model of product development, ``goodness'' is equated 
with the success of many varied players in the resulting ecosystem, 
all-the-while competing with each other to make contributions to and 
gain the loyalty of the end-consumer. Their primary mode of operation 
is innovating, creating more novel and unique value, and driving prices 
down so that more people can benefit from the products and services 
being offered. For example, printers that once only printed black & 
white text and sold for hundreds of dollars, can now print color 
documents and photographs, make color copies, and scan documents, all-
in-one, and sell for $79.99. People using printing services enjoy the 
experiences of sharing photos with family and friends anywhere in the 
world, as their printer interfaces with the Internet and uploads their 
favorite photos automatically for sharing with others.
    The pace of innovation in the IT industry is accelerated, marked by 
very rapid time-to-market. Product development cycles are 9-15 months 
and product life times are in the range of three to six months. The 
phrase that probably best characterizes this industry and its 
unrelenting pace of new value creation is ``innovate or die.''

The Myth of ``Home-Run'' Patents

    ``Home-run'' patents are those which are key enablers for unique 
products or spawn whole new industries, and represent massive potential 
licensing revenue windfalls for a university. Some universities have 
built their technology transfer offices (TTOs) around the belief that 
the next ``home-run'' patent is imminent, eager to capture a 
significant windfall. Other universities have been driven by the fear 
of being known as the TTO that let the ``big one'' get away. This set 
of beliefs is reinforced by the universities' TTO focus on licensing 
revenue as a measure of their success.
    These beliefs are driving the universities to behave as if the 
major, if not only, mechanism for transferring new knowledge is through 
patenting and licensing. However, there are many mechanisms for 
disseminating new knowledge out from universities, including student 
hiring, publications, conferences, informal exchanges, visiting 
researchers, etc.
    For IT companies, the perspective about intellectual property is 
quite different. Most IT products involve the combined use of hundreds 
of patented ideas. Many of these patents are incremental advances and 
concepts for which there is no single patent that defines a key 
enabling technology. Due to the large number of patents in a typical IT 
product, companies will not pursue royalty-bearing licenses with 
universities. Also, the IP in IT products is unlikely to be clearly 
unique and defensible, since other approaches are generally feasible, 
making it difficult and expensive to protect. For many IT companies, 
the role of IP is to accelerate product development, rather than to 
enable it. It's not about the value of a single patent (since it is 
relatively easy to design around any IP that might present a problem); 
it's more about the exchange of ideas and collaborative research that 
builds out an ecosystem which utilizes the technologies being 
developed.
    As a company in the IT industry, we don't believe in ``home-run'' 
patents, and we don't believe that they exist (for us). Innovation is 
driven by the knowledge that is created through collaboration and the 
flow of ideas, by working with leading research centers and doing good 
research, and by hiring well-educated students into the research and 
development activity.

Bayh-Dole: Its Goals and Results

    As we have reviewed the original intent of the Bayh-Dole 
legislation, three of its major goals are identified as--

        1.  to promote the utilization of inventions arising from 
        federally supported research and development,

        2.  to encourage maximum participation of small business firms 
        in federally supported research and development efforts,

        3.  to promote collaboration between commercial concerns and 
        nonprofit organizations, including universities

Promoting Industry-University Collaboration
    In this testimony, we will take an in-depth look goal #3 (above), 
from the perspective of the IT industry.
    How well did Bayh-Dole do in terms of its objective to promote 
collaboration? From the results that have been observed over the past 
10 years, we would have to give it a poor-to-failing grade. 
Unfortunately, much of what has actually happened has been exactly the 
reverse of what was intended, when the legislation was written.

        1.  Bayh-Dole has contributed to shifting the focus and 
        attention of joint research towards rights, ownership, and the 
        licensing of intellectual property, and away from 
        collaboration, partnership, and innovation.

        2.  Bayh-Dole has accelerated the building of a bureaucracy--
        the technology transfer offices in U.S. universities. Since the 
        inception of Bayh-Dole in 1980, more than 65 U.S. universities 
        have put into place technology transfer offices as a way of 
        dealing with the increasing emphasis on monetizing intellectual 
        property, the belief in ``home-runs,'' and the shortfalls in 
        university funding.

        3.  The existence of these technology transfer offices has, in 
        turn, constrained (not amplified) the flow of knowledge and 
        research outward from universities. The TTOs have focused 
        almost exclusively on patenting and licensing revenues, and in 
        many cases operate independently of the industrial liaison 
        offices, the sponsored projects offices, and other mechanisms 
        that universities use to promote engagement and interaction 
        with industry. One notable exception to this phenomenon is 
        where the TTOs have been combined with Industrial Liaison 
        Offices to provide a more comprehensive engagement model 
        between universities and industry (e.g., the UC-Berkeley IPIRA 
        model.)

        4.  The increased focus on rights, licenses, and revenues has 
        strained the already challenging and tenuous relationships that 
        have existed between U.S. companies and universities. This 
        shift in focus towards ``intellectual property'' has made it 
        more difficult for these two parties to work together. It has 
        fueled mistrust, escalated frustration, and created a misplaced 
        goal of revenue generation, which has moved the universities 
        and industry farther apart than they've ever been.

        5.  The process of negotiating agreements that specify how to 
        work together in joint research areas have turned into 
        disagreements over IP rights and ownership, and taken up to 2+ 
        years to converge, if indeed both parties ever come to mutual 
        agreement. Often, both parties give up, disengage from the 
        negotiation process, and resolve never to try and engage with 
        each other again in joint collaborations.

        6.  The inability to reach agreement, and the frustration, 
        mistrust, and damaged relationships over IP rights have 
        contributed to a ``silent breaking,'' where companies decide 
        that it's too costly and too much trouble to try and work with 
        universities. Companies then ``walk away'' and find other 
        partners such as the elite universities in Russia, India, and 
        China, who are more flexible in their working arrangements, are 
        easier to work with, and are more agile and speedy in their 
        negotiations.

        7.  If effect, what Bayh-Dole has done, is rather than create a 
        congressionally-mandated reason for universities and industry 
        to work together for mutual benefit and increased societal 
        benefit, is to organize a ``shot-gun wedding,'' where both 
        parties are trying to do the right thing, but it simply doesn't 
        work because the focus is misplaced on rights, ownership, and 
        revenue generation.

    While the overall practice of collaboration has eroded 
significantly in the past decades, it's important to note that not all 
universities have jumped on the IP bandwagon and focused on IP solely 
as a source of revenue for their institutions. In our experience there 
are some universities that can strike an appropriate balance between 
fostering collaborative relationships with industry, and at the same 
time managing the rights and patents associated with IP development. 
Universities such as Purdue, Georgia Tech, UC-Berkeley, and Stanford 
seem to know how to balance all of these needs, and still keep a focus 
on becoming the partners of choice for U.S. companies.



Innovation, Globalization, and New Interaction Models

    While universities and the IT industry have been experiencing 
increasing relationship difficulties during the past decade, the world 
situation has been changing dramatically.
    When Bayh-Dole was created, it was enacted to address a particular 
situation and need, at the time. Now, 27 years later, the U.S. IT 
industry (as well as others) is challenged with a new set of 
circumstances--the forces of globalization, rapid time-to-market, 
increasing sophistication of products and services, and the need for 
both rapid technological and market innovation.
    With the Internet and the ready availability of global supply 
chains, we are experiencing an unprecedented ``flattening'' of the 
world and a ``leveling of the playing fields'' which before were 
thought to be the exclusive purview of U.S. industry. The expanded 
information and communications technology (ICT) infrastructure, 
together with the increased emphasis on science, technology, 
engineering, and math (STEM) education globally, has created a 
situation where literally anyone anywhere can create an innovative 
product or service, and bring it to market quickly. In this modern, 
interconnected world, new companies, new industries, and whole new 
ecosystems are created in a fraction of the time that it used to take 
for them in past to become established.
    The ``speeding up'' of the world's rapid pace of development is 
requiring that we find new models and ways of working together, to 
match the accelerating pace of global innovation.
    In light of this, we observe the following situations:

        1.  Today, most new information and communications technology 
        (ICT) companies (even small ones of 5-10 employees) are 
        structured to be ``global,'' from the outset. One does not have 
        to be a big company, to be a global company anymore. For 
        example, every university graduate with entrepreneurial 
        aspirations can start out their career, linking with fellow 
        students from other countries, and is enabled to access design, 
        development, and manufacturing facilities on a global basis.

        2.  Global companies can work with anyone, anywhere on the 
        planet, and are not constrained to working with university 
        partners in a single country, region, or location. They can 
        choose partners who have knowledge, ideas, insights, and 
        interesting research to offer, and who are not constrained or 
        slowed down by bureaucracies focused on rights, IP ownership, 
        and licensing revenues.

        3.  As the need for speed and rapid innovation has increased, 
        university TTOs have slowed down and impeded the process of 
        collaboration, and made their institutions increasingly more 
        unattractive and difficult to work with. This has, in turn, 
        encouraged companies to find other university partners to 
        engage with, typically outside the U.S. It has shifted the 
        sponsorship of research, the vigorous multi-disciplinary 
        interactions, and the flow of ideas to universities in other 
        countries. In terms of innovation and the future of success of 
        U.S. industry, this is a most distressing development.

        4.  The decreasing interaction and engagement of U.S. 
        universities with companies threatens to reduce the relevance 
        of their research and the quality of their students, and 
        therefore erodes one of the major foundations of the U.S. 
        national innovation ecosystem.

The Technology Transfer Model
    While companies go in search of willing partners who are easy to 
work with on a global basis, universities find that they are becoming 
increasingly isolated from industry engagement, and are more reliant 
than ever on government funding and sponsorship.
    Perhaps even more worrisome is that the focus on intellectual 
property of the past two decades has had the unintended effect of 
institutionalizing an engagement model which is now obsolete in the 
modern world.
    In the old way of operating, research ideas were conceived of, 
developed, prototyped, and then shown to industry partners for 
evaluation, further engagement, and hopefully transferred into one or 
more product development efforts. Usually, universities worked 
independently during the early years of technology research, and then 
when they ``had something'' that was tangible and interesting, they 
went searching for industrial partners.
    This research-then-transfer model (more commonly referred to as 
``technology transfer'') worked well 20+ years ago when the pace of 
innovation was a lot slower than it is today, when globalization was 
relatively unheard of, and when the world was a lot less competitive in 
the drive to bring valuable products and services to market quickly. 
Back then, we were afforded the luxury of creating something first, and 
then searching for an application of what was hoped to be a ``valuable 
technology.''

Collaborative Engagement Models
    As the pace of innovation has quickened, particularly in the past 
decade, the research-then-transfer model has been quietly rendered 
obsolete. Today, the development and engagement models of choice favor 
multiple partners from the outset, engaging in the free-flow of ideas, 
simultaneously envisioning many different applications for their work, 
and creating different types of products and systems that the 
technologies might be used in.
    These new collaborative interaction models are inherently more 
parallel, more vigorous and engaging, and involve multiple partners 
(even competitors) working in tandem on their own ideas of what 
particular idea or innovation that will provide new value to the 
marketplace. They can't want for a single contribution to be 
researched, perhaps with a wrong or misguided target application in 
mind, and then have to redo the research later.
    Some of the key points around innovation and interaction models 
are:

        1.  Technology transfer is an inherently serial process, takes 
        too long, usually directs research along a single vector of 
        target application, and runs the risk of missing the more 
        useful applications of technology, when the work is at a 
        ``transferable stage.''

        2.  The idea of ``valuable technology sitting on the shelf'' at 
        major research universities is flawed. Much of the value coming 
        out of the innovation process lies in the targeting of early 
        stage ideas to target applications and uses of the technology. 
        This is not where universities can engage from a position of 
        strength.

        3.  Technology transfer focuses institutions on ``things''--
        rights, patents, licenses, etc. These are late-stage, after-
        the-fact indicators that something valuable has been going on 
        between interested parties.

        4.  Collaborative models are more parallel, intensive, open 
        processes that generate a flow of ideas, and calibrate 
        directions and likely results quickly. They involve multiple 
        research perspectives, and often result in a particular idea or 
        concept being effectively utilized in multiple places, across 
        multiple disciplines, and enabling multiple commercialization 
        efforts to be undertaken simultaneously.

        5.  Collaborative models engage universities and industrial 
        partners at the beginning of the process, there ideas are soft 
        and malleable, and could go in a myriad of directions. With 
        multiple partners present, concepts and ideas can be developed 
        in many different directions, simultaneously from the 
        beginning.

        6.  Collaborative models are more efficient--they minimize the 
        risk of developing a research work on one particular line of 
        application, and then finding out late in the process that the 
        wrong path was chosen.

        7.  Collaborative models focus on people, capability 
        development, the flow of ideas. They foster relationship-
        building, help to build trust, and avoid the traps of 
        negotiating who owns what, and what monies should flow to whom, 
        before the work is ever done.

    This shift to more interactive and engaging research and 
development models favors the processes of rapid knowledge creation, 
the free flow of ideas and concepts, the parallel development of 
multiple target applications of an idea or technology. In this new 
model, no single idea or concept becomes the driving force behind 
compelling new value--it now takes a whole array of new ideas and 
concepts woven together in such a way as to make the new product or 
system revolutionary at the time it's interested. As we stated earlier, 
no single idea can be a ``home run,'' and the value of a single patent 
without a whole series of others that complement it, is essentially 
trivial.

University-Industry Relationships
    Another important consequence of becoming overly focused on IP, 
rights, and ownership, is the damage that is done to long-term 
industry-university relationships. Universities have a wide range of 
support needs. As mentioned earlier, the IP-focused negotiations which 
impede collaboration, and the escalating frustrations, mistrusts, and 
ill-will that result from not being able to reach agreement, have 
caused incredible damage to these relationships. Yet the damage goes 
far beyond the bounds of the sponsored research agreement itself.
    In actuality, the funding that sponsored research generates for 
many universities, is usually only a very small portion of their total 
income. Yet the negative perceptions, the ill-will, and the memories 
that are generated from failed negotiations--the silent breaking, and 
the walk-away behaviors--have significant spill-over effects into other 
sources of sponsorship for the university. Long after a single 
negotiation has failed, the reluctance to participate in other areas of 
support such as gifts, grants, endowments, research contracts, 
consulting arrangements, and others lives on. The negative consequences 
to the universities on a long-term, aggregate basis dwarf any amount of 
money that could ever be recouped through IP licenses and royalties.




Summary

    For the IT industry to be successful in the coming decades, we must 
distinguish between inventions (which take us quickly into IP rights, 
ownership, patents, and licensing discussions) and innovation which is 
the life-blood of the IT industry. We must recognize that there are 
different business models operating across different industry sectors, 
and while a strong IP position may adequately cover the needs of some 
industries, the need for a focus on innovation, collaboration, and new 
ecosystem development goes largely unaddressed.
    To make the IT industry competitive, we need to begin by creating 
strong support for industry-university collaboration, and begin to put 
into place what I call Innovation 3.0--the next version of a rapid, 
vigorous, and healthy innovation environment.
    We must help make U.S. universities the global partners of choice, 
in this new, global and ``flattened'' world, and shift the focus of 
attention back to people, the flow of ideas, and mutually beneficial 
interactions. Bayh-Dole, as it is presently written, does not 
accomplish this, but rather shifts attention away from people and ideas 
(the raw materials of innovation) to IP, rights, licenses, and the 
ownership of things.
    Bayh-Dole also makes a dangerous leap, in that it confuses 
invention with innovation, and reinforces a language and a vocabulary 
solely around rights and ownership. These elements are late-stage 
artifacts of an obsolete technology transfer model, which runs the risk 
of putting America out of the loop of a competitive, global marketplace 
where value is created and true innovation takes place independent of 
any country, policy, region, or institution.
    With Bayh-Dole and other legislation we've tried to address the 
protection of inventions through a strengthening of IP policy. It's 
time to do something for the other half of the equation--Ignite 
Innovation, the life-blood of new industries and the foundation of 
economic development.
    And that time is now!
    Thank-you for your attention, and for the opportunity to testify 
here today.

References

Augustine, Norman R. (2005), ``Rising above the Gathering Storm: 
        Energizing and Employing America for a Brighter Economic 
        Future,'' The National Academies, Washington, D.C.

Florida, Richard, (2007). ``The Flight of the Creative Class--The New 
        Global Competition for Talent,'' Harper Collins Publishers, New 
        York, N.Y.

Friedman, Thomas L., (2005). ``The World is Flat, A Brief History of 
        the Twenty-First Century,'' Farrar, Straus, and Giroux, New 
        York.

Johnson, Wayne C., (2006). ``The Collaboration Imperative,'' Weber & 
        Duderstadt (eds.), Universities and Business: Partnering for 
        the Knowledge Society, Economica, London.

Johnson, Wayne C., (2006). ``Challenges in University-Industry 
        Collaborations,'' Weber & Duderstadt (eds.), Universities and 
        Business: Partnering for the Knowledge Society, Economica, 
        London.

Johnson, Wayne C., (2007). ``Innovation 3.0: Creating the Next Level 
        Twenty-First Century Innovation Ecosystem Platform,'' Kauffman 
        Thoughtbook 2007, Ewing Marion Kauffman Foundation, Kansas 
        City, MO.

Johnson, Wayne C., (2008). ``Partnering on a Global Scale,'' Weber & 
        Duderstadt (eds.), The Globalization of Higher Education, 
        London. (to be published)

Litan, Robert E., Lesa Mitchell, and E.J. Reedy (2007). 
        ``Commercializing University Innovations: Alternative 
        Approaches,'' Working Paper, National Bureau of Economic 
        Research, Cambridge, MA.

Mowery, David C., (2005). ``The Bayh-Dole Act and High-Technology 
        Entrepreneurship in U.S. Universities: Chicken, Egg, or 
        Something Else?'' Colloquium on Entrepreneurship, Education, 
        and Technology Transfer, University of Arizona, AZ.

Thursby, Jerry and Thursby, Marie, (2006). ``Here or There,'' The 
        National Academies Press, Washington, D.C.

Yarris, Lynn, (2007). ``The Future of Innovation: A BASIC Roundtable 
        Symposium and Networking Event,'' Menlo Park, California (to be 
        published)

                     Biography for Wayne C. Johnson

    Wayne C. Johnson is the Vice President for Hewlett-Packard 
Company's University Relations Worldwide, located at HP Laboratories in 
Palo Alto, California. He is responsible for higher education programs 
in research, marketing and sales, recruitment, continuing education, 
public affairs and philanthropy.
    Johnson joined HP in 2001 from Microsoft's University Relations 
department where he managed Program Managers and administrative staff 
across a customer base of 50 tier-one universities. From 1967 to 2000, 
he held a variety of positions at the Raytheon Company in Waltham, 
Massachusetts, including National Sales Manager for Wireless Solutions, 
Manager of International Financing and Business Development, Manager of 
Administration and Strategic Planning for Raytheon's Research Division, 
and Manager of Program Development and Operations for Technical 
Services.
    Johnson received his B.A. from Colgate University, Hamilton, NY and 
his M.B.A. from Boston College's Carroll School, Boston, MA. He was an 
Adjunct Professor of Management at Boston University from 1977 to 1999.
    Johnson currently manages a worldwide organization of Program 
Managers and administrative staff working across 94 universities 
worldwide.
    Johnson serves as a board member of:

          Anita Borg Institute for Women and Technology (ABIWT)

          MentorNet Advisory Board (MN)

          Industrial Advisory Board, the International 
        Conference on Engineering Education (ICEE)

          Wentworth Institute of Technology (WIT)

          Alliance for Science and Technology Research for 
        America (ASTRA)

    His memberships include:

          The Glion Colloquium

          Olin College's President's Council-Chair

          Government-University-Industrial Research Roundtable 
        (GUIRR)

          Association of American Colleges and Universities 
        National Leadership Council (AACU)

          Accreditation Board for Engineering and Technology 
        Industrial Advisory Council (ABET)

          Bay Area Science and Innovation Consortium (BASIC)

          University-Industry Demonstration Partnership (UIDP) 
        Founding Sponsor

    Chairman Wu. Thank you very much, Mr. Johnson. Professor 
Lemley, please proceed.

STATEMENT OF DR. MARK A. LEMLEY, PROFESSOR OF LAW, STANFORD LAW 
    SCHOOL; DIRECTOR, STANFORD PROGRAM IN LAW, SCIENCE, AND 
                           TECHNOLOGY

    Dr. Lemley. Thank you, Mr. Chairman, distinguished Members 
of the Subcommittee. I am Mark Lemley. I teach at Stanford Law 
School. I want to make it clear that I am here speaking on my 
own behalf, and not Stanford's. In fact, I suspect I will say 
at least a few things that will horrify them.
    Bayh-Dole fundamentally changed the way universities 
approach technology transfer, and you can see that best in the 
statistics. Universities obtain 16 times as many patents today 
as they did in 1980. Now, everybody is getting more patents, 
but still, universities' share of all patents in the United 
States is more than five times greater than it was before Bayh-
Dole.
    Universities license those patents for upwards of $1 
billion a year. The effects of this surge in university 
patenting, I think, have been both good and bad. On the 
positive side, I think that the Bayh-Dole Act has had the 
effect, has achieved the goal, of encouraging university 
inventors to patent inventions, and to license patents to 
private companies that can make use of them. So, the risk that 
inventions were languishing in universities, that they were 
never commercialized, has I think been addressed in significant 
measure by Bayh-Dole. And particularly in the biomedical area, 
these university-private partnerships have been responsible for 
a number of significant breakthroughs, and I think we are going 
to hear about at least one in a moment.
    On the negative side, universities, I think, too often look 
to the short run bottom line, how do I maximize my revenue from 
licensing fees, and setting their licensing priorities, not to 
the broader picture of how can I best improve technology 
transfer for the benefit of society. Particularly in the 
information technology industries we have just heard about, 
there is a sense that university patents are interfering with, 
rather than promoting the dissemination of technical knowledge 
to the world at large, that universities are filing lawsuits to 
try to restrict the use of this technology, and that they are 
adversaries, not partners, in the deployment of technology.
    There is, in fact, the situation has gotten so bad that one 
information technology official has publicly referred to 
universities as ``crack addicts,'' driven by ``small-minded 
tech transfer offices addicted to patent royalties.'' Now, I 
don't think the situation is as bad as all that, or at least 
not as bad as all that most of the time, but the fact that 
there is this widely divergent view between different 
industries suggests that we have got an issue, or a problem we 
need to address, and the testimony here, the very different 
approaches we have heard so far, I think, is evidence of that.
    The need for Bayh-Dole is greatest in the biomedical 
industry, where the FDA approval process, and the hundreds of 
millions of dollars, and the years of regulatory approval that 
are required to develop new drugs, mean that just coming up 
with an idea for a drug is only the very beginning of the 
process, and that if there isn't exclusivity associated with 
that drug, no one is going to take it all the way through the 
regulatory environment. By contrast, in a field like computer 
software, exclusivity not only often isn't necessary, but it 
can actively interfere with the use of the technology.
    The solution, I think, is largely in the hands of 
universities, rather than legislative response to Bayh-Dole. 
Universities need, I think, to take a broader view of their 
role in technology transfer. Technology transfer from 
universities ought to have as its goal maximizing the social 
impact of technology, not simply maximizing a university's 
licensing revenue.
    Sometimes, that means patenting an invention and granting 
an exclusive license. That is going to be true in a lot of 
cases, in which there is a long, expensive commercialization 
process that has to happen after the invention has been made. 
Sometimes, it will mean patenting the invention but granting 
nonexclusive licenses to all comers. That is especially true of 
keystone or enabling technologies, the kinds of technologies 
that open up an entirely new field. So, university patenting 
was responsible for breakthroughs in chimeric DNA and in DNA 
manipulation, in monoclonal antibodies. Those patents were all 
licensed on a nonexclusive basis to all comers, and I think the 
industry benefited from that. If we decided that one and only 
one company can have control over recombinant DNA technology, 
or one and only one company can have control over monoclonal 
antibodies, I think the biotechnology industry would not be as 
vibrant and as diverse as it is today.
    And sometimes, I think, promoting social technology 
transfer means foregoing patent protection altogether. So, 
universities have an obligation, a role, to try to figure out 
not just what maximizes the bottom line, but what actually is 
going to achieve the goal of commercialization.
    The government has an important oversight role in this 
process. I think the Bayh-Dole Act contains various provisions 
designed to limit exclusive licensing of federally owned 
inventions, and to step in to require reasonable licensing of 
university owned inventions, so-called march-in rights in 
particular circumstances. So, my recommendation, at the end of 
the day, is not that we rewrite Bayh-Dole, not that we change 
it in fundamental ways, but that universities need to pay 
attention to the characteristics of the invention and the 
technology, and that if they don't, there is an oversight role 
for government to step in and make sure that the licensing 
occurs on the most reasonable and most favorable terms.
    Thank you.
    [The prepared statement of Dr. Lemley follows:]

                  Prepared Statement of Mark A. Lemley

Summary of Testimony

    The Bayh-Dole Act was enacted in 1980 in order to make it easier 
for universities to transfer technology to the private sector, and to 
solve the perceived problem of inventions made in universities 
languishing there, rather than being deployed to solve real world 
problems.
    Bayh-Dole fundamentally changed the way universities approach 
technology transfer. Universities obtain 16 times as many patents today 
as they did in 1980, and their share of all patents is five times 
greater than it was before Bayh-Dole. They license those patents for 
upwards of $1 billion a year in revenue.
    The effects of this surge in university patenting have been both 
good and bad. On the positive side, it seems clear that the Act has 
achieved its goal of encouraging university inventors to patent those 
inventions and to license those patents to private companies that can 
make use of them. Particularly in the biomedical area, these 
university-private partnerships have been responsible for a number of 
significant breakthroughs.
    On the negative side, universities have too often looked to the 
short-run bottom line in setting their licensing priorities, granting 
exclusive rights to breakthrough technologies to businesses that may 
not be best suited to exploit them for the benefit of society as a 
whole. Particularly in the information technology (IT) industries, 
there is a sense that university patents are interfering with rather 
than promoting the dissemination of technical knowledge to the world at 
large. The growing number of university-filed and university-sponsored 
patent lawsuits in the IT industries, many in association with non-
practicing entities (or so-called ``patent trolls''), has added to the 
sense in those industries that universities are often adversaries, not 
partners, in the deployment of technology.
    The problem in my view is not with Bayh-Dole per se, but with the 
way it has sometimes been implemented without sufficient sensitivity to 
the very different characteristics of different industries. The need 
for Bayh-Dole is greatest in the biomedical industry, where the FDA 
approval process and the hundreds of millions of dollars required to 
develop new drugs means that few will see an idea through to fruition 
without the promise of exclusivity. By contrast, in a field like 
computer software, exclusivity not only isn't necessary but may 
actively interfere with the use of the technology.
    Universities should take a broader view of their role in technology 
transfer. University technology transfer ought to have as its goal 
maximizing the social impact of technology, not merely maximizing the 
university's licensing revenue. Sometimes this will mean patenting an 
invention and granting an exclusive license. Sometimes it will mean 
granting nonexclusive licenses to all comers. And sometimes it should 
mean foregoing patent protection altogether. For Bayh-Dole to work as 
intended, universities must look beyond their short-run profit and 
think about what is best for society as a whole.
    The government has an important oversight role in this process. 
Bayh-Dole contains various provisions intended to limit the exclusive 
licensing of federally owned inventions (35 U.S.C.  209) and to step 
in to require reasonable licensing of a university-owned invention (35 
U.S.C.  203). To date, those provisions have not been used to exercise 
effective oversight over university licensing. But they could be. What 
is required, then, is not new legislation as much as greater vigilance 
on the part of both universities and federal funding agencies to ensure 
that university patenting serves its intended purpose and is not 
misused. Congress should exercise its oversight function to ensure that 
this happens, but it does not need to change the Act.
    If Congress were to rewrite Bayh-Dole, the one change I would 
encourage is the removal of the provisions (such as 35 U.S.C.  204) 
that discriminate against foreign businesses and international trade. 
They are the product of an earlier era of protectionism, and seem out 
of place in the global marketplace in which we find ourselves. 
Doubtless American universities have ample incentive to support local 
businesses; they should not be precluded from licensing their 
inventions to whoever can best provide the benefits of those inventions 
to the American consumer.

                   Are Universities Patent Trolls?\1\
---------------------------------------------------------------------------

    \1\  2006 Mark A. Lemley.
---------------------------------------------------------------------------
                           Mark A. Lemley\2\
---------------------------------------------------------------------------
    \2\ William H. Neukom Professor of Law, Stanford Law School; of 
counsel, Keker & Van Nest LLP. I am particularly grateful to a large 
number of people who read this and gave me comments, even though simply 
asking the question is anathema to many of them. In particular, thanks 
are due to David Adelman, Ann Arvin, Robert Barr, Linda Chao, Michael 
Cleare, Peter Detkin, Brett Frischmann, Carl Gulbrandsen, Rose Hagan, 
Joel Kirschbaum, Kathy Ku, Gary Loeb, Lita Nelsen, Alan Paau, Arti Rai, 
David Simon, and Janna Tom, and to participants in conferences at 
Washington University School of Law and the Licensing Executives 
Society/Association of University Technology Managers joint meeting for 
comments on this topic. Not only don't they necessarily agree with what 
I've said, in many cases I'm sure they don't. This is an edited 
transcript of a speech, and reads like it.
---------------------------------------------------------------------------

I. Complaints About University Patents

    The confluence of two significant developments in modern patent 
practice leads me to write a paper with such a provocative title.\3\
---------------------------------------------------------------------------
    \3\ So I don't give anyone a coronary, the general answer to the 
question in my title is no.
---------------------------------------------------------------------------
A. The Rise of Patent Holdup
    The first development is the rise of hold-up as a primary component 
of patent litigation and patent licensing. You can call this the troll 
problem if you like.\4\ I prefer to think of it as the hold-up problem. 
But whatever we call the problem, it seems quite clear that more and 
more patent litigation is being filed, and significant money is being 
made, by non-manufacturing entities--entities that don't themselves 
actually make the product and in many cases don't actually engage in 
developing the technology very far at all. Many of these entities also 
engage in tactics that allow them to lay low and then take a mature 
industry by surprise once participants in the industry have made 
irreversible investments.\5\ The holdup or troll problem is 
particularly significant in component-driven industries, notably 
information technology (IT), where the problem is compounded by the 
fact that a product developer such as Intel that must aggregate 
thousands of different inventions into its semiconductor chip is 
vulnerable to hold-up by any one of the thousands of inventors. Patent 
owners in those component industries can capture far more than the 
intrinsic value of their invention, because under long-standing patent 
law patent owners have the right not just to sue and get paid the 
percentage of the value contributed by their invention but to enjoin 
the sale of Intel's entire chip until it can design a new chip that 
avoids infringing that patent, something that might take years and 
require investing billions of dollars in a new fab.\6\ These factors 
have combined to produce the growth industry of the new millennium: 
patent hold-up. Hundreds of companies are engaging in efforts to 
capture not just the value of what you contributed to as an invention, 
but a disproportionate share of somebody else's product.
---------------------------------------------------------------------------
    \4\ The term ``patent troll'' was coined in the late 1990s by Peter 
Detkin, then assistant general counsel at Intel, to refer to patent 
owners who hide under bridges they did not build to pop out and demand 
money from surprised passers-by. I'll talk about some definitions of 
``patent troll'' at the end of this paper.
    \5\ For discussions of this problem, see, e.g., Mark A. Lemley, Ten 
Things To Do About Patent Holdup of Standards (And One Not To), 48 B.C. 
L. Rev. 149 (2007); Mark R. Patterson, Inventions, Industry Standards, 
and Intellectual Property, 17 Berkeley Tech. L.J. 1043, 1048-51 (2002).
    \6\ On this problem and how it leads to settlements well in excess 
of the intrinsic value of the patent, see Mark A. Lemley & Carl 
Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. 
-- (forthcoming 2007); Carl Shapiro, A Model of Patent 
Bargaining With Holdup (working paper 2006).
---------------------------------------------------------------------------
B. The Rise of University Patenting
    The second development in the last three decades is the massive 
surge in university patenting.\7\ Universities obtained sixteen times 
as many patents in 2004 as in 1980,\8\ and universities had 1000 times 
as many technology transfer offices.\9\ In significant measure this is 
a result of the Bayh-Dole Act,\10\ which not only permits but 
encourages university patenting of federally-funded inventions. But it 
is also a reflection of the growth in importance of patents more 
generally. Those university patents don't sit dormant; universities 
license them to companies for over $1 billion a year in revenue.\11\ 
Patents are now a significant contributor to some university bottom 
lines. And importantly, more and more university patents are patents on 
the very earliest stages of technology. It is universities, perhaps not 
surprisingly given their role in basic research, who are patenting the 
basic building blocks in new technologies. We see this with particular 
force in nanotechnology, an area I have studied in detail.\12\ 
Universities, which account for one percent of patents on average 
across all fields, account for 12 percent of all patents in 
nanotechnology, and more than two-thirds of what I identify as the 
basic building block patents in nanotechnology.\13\ The other area in 
which university patents are significant is biotechnology, where they 
represent about 18 percent of all patents.\14\ As a result, 
universities have met a much bigger role in patenting than they ever 
have before.
---------------------------------------------------------------------------
    \7\ For a discussion of the growth of university patenting and its 
potential risks, see DAVID C. MOWERY ET AL., IVORY TOWER AND INDUSTRIAL 
INNOVATION: UNIVERSITY-INDUSTRY TECHNOLOGY TRANSFER BEFORE AND AFTER 
THE BAYH-DOLE ACT 4 (2004); John R. Allison et al., University Software 
Ownership: Trends, Developments, Issues (working paper 2006); Katherine 
J. Strandburg, Curiosity-Driven Research and University Technology 
Transfer, in University Entrepreneurship and Technology Transfer: 
Process, Design, and Intellectual Property 93 (Gary D. Libecap, ed., 
2005).
    \8\ Before 1980, universities worldwide obtained about 250 U.S. 
patents a year. In 2003, they obtained 3933 patents, an almost sixteen-
fold increase. See Bernard Wysocki Jr., College Try: Columbia's Pursuit 
of Patent Riches Angers Companies, WALL ST. J., Dec. 21, 2004, at A1.
    \9\ Lorelai Ritchie de Larena, The Price of Progress: Are 
Universities Adding to the Cost?, 43 Hous. L. Rev. 1373, 1412 (2007) 
(``There were only 25 active technology-transfer office in the United 
States an the time the Bayh-Dole Act was passed. By the twenty-fifth 
anniversary of the Act, there were 3300'').
    \10\ 35 U.S.C.  200 et seq.
    \11\ Jerry G. Thursby & Marie C. Thursby, University Licensing and 
the Bayh-Dole Act, 301 SCI. 1052, 1052 (2003); The Big Ten: 
Universities That Made the Most Licensing Dollars Last Year, IP L. & 
BUS., Jan. 5, 2005, at 14 (estimating $1 billion in 2004); Bernard 
Wysocki Jr., Columbia's Pursuit of Patent Riches Angers Companies, Wall 
St. J., Dec. 21, 2004, at A1, A12 (estimating $1.3 billion per year).
    \12\ Mark A. Lemley, Patenting Nanotechnology, 58 Stan. L. Rev. 601 
(2005).
    \13\ Id. at 616 & Table 2.
    \14\ See David E. Adelman & Kathryn L. DeAngelis, Patent Metrics: 
The Mismeasure of Innovation in the Biotech Patent Debate, 85 Tex. L. 
Rev. -- (forthcoming 2007), available at http://
papers.ssrn.com/sol3/papers.cfm?abstract-id=881842
---------------------------------------------------------------------------
C. Are Universities Engaged in Holdup?
    At the confluence of these developments is a growing frustration on 
the part of industry with the role of universities as patent owners. 
Time and again, when I talk to people in a variety of industries, their 
view is that universities are the new patent trolls. One even referred 
publicly to universities as ``crack addicts'' driven by ``small-minded 
tech transfer offices'' addicted to patent royalties.\15\
---------------------------------------------------------------------------
    \15\ Comments of Chuck Fish at the Fordham International IP 
Conference, April 22, 2006.
---------------------------------------------------------------------------
    Why such a vehement reaction? One important reason is that 
universities are non-manufacturing entities. They don't sell products. 
I don't think that necessarily means they're bad actors. But it does 
mean that their incentives in dealing with the patent system align in 
many ways with those of private-sector patent licensing shops. One of 
the assumptions corporations in patent-intensive industries (such as IT 
or increasingly biotechnology) make about patenting is symmetry: that 
if a competitor sues you for infringement you can sue them back. That 
symmetry deters patent litigation in the industries in which it 
operates.\16\ But that symmetry doesn't exist for non-manufacturing 
entities. Universities aren't going to cross license. They aren't going 
to trade their patents away in exchange for a cross-license, because 
they don't need a license to other people's patent rights.\17\ Instead, 
they want money. And to an IT general counsel who deals with dozens of 
threats of suit every year, any patent owner in that position looks an 
awful lot like a patent troll. In short, there's definitely a sense 
among industry representatives that universities are greedy when it 
comes to licensing patents.
---------------------------------------------------------------------------
    \16\ See, e.g., John R. Allison et al., Valuable Patents, 92 Geo. 
L. J. 435, 474 (2004) (finding that semiconductor patents are litigated 
only one-third as often as other patents, and offering the symmetry of 
relationships as an explanation). To be sure, other factors, such as 
industry concentration and large patent portfolios, may play a 
significant role in causing disputes in this industry to be resolved 
without litigation. See Gideon Parchomovsky & R. Polk Wagner, Patent 
Portfolios, 154 U. Pa. L. Rev. 1 (2005).
    \17\ Theoretically universities could be sued for infringement, but 
they aren't--there is only one reported decision involving an 
infringement suit against a university between 1983 and 2004. See Tao 
Huang, The Experimental Purpose Doctrine and Biomedical Research, 11 
Mich. Telecomm. & Tech. L. Rev. 97, 111-12 & tbl. 1 (2004). For reasons 
this might be true, see Rowe, supra note --, at 940-44.
---------------------------------------------------------------------------
    Compounding the perception of greed is that university patent 
licensing offices have strong institutional incentives to grant 
exclusive rather than non-exclusive licenses, for various reasons. 
First, exclusive licensing royalty rates are almost always higher than 
non-exclusive rates. That's not surprising, since the licensee is 
getting more from an exclusive license than from a non-exclusive 
license. From the perspective of a tech transfer office focused on this 
quarter's bottom line, that higher royalty rate is hard to turn down. 
Second, the companies with which they are negotiating often want 
exclusivity.\18\ They are especially likely to get it if the company in 
question is a faculty-organized startup.\19\ Finally, exclusive 
licensees often pay the cost of patent prosecution, a relatively small 
savings but an immediate one that impacts the tech transfer office's 
bottom line. The result is that the overwhelming majority of university 
patent licenses are exclusive. In the nanotech licenses I studied (just 
a few dozen, admittedly), between 95 and 100 percent of the university 
licenses granted were exclusive.\20\ One example from the biotechnology 
field of an exclusive license to an enabling technology is WARF's 
field-exclusive license to Geron of all stem cell patents, granted 
shortly before those stem cell patents became extraordinarily valuable 
because the Bush administration obstructed the development of new stem 
cell lines.\21\
---------------------------------------------------------------------------
    \18\ See, e.g., William J. Holstein, Putting Bright Ideas to Work 
Off Campus, N.Y. Times, Nov. 5, 2006, at 11 (quoting William R. Brody, 
president of Johns Hopkins University) (``Companies, on the other hand, 
want exclusive licenses.'').
    \19\ Ritchie de Larena, supra note --, at 1415 
(referring to ``tacit favoring'' of such companies).
    \20\ Lemley, supra note --, at 627; ETC GROUP, 
NANOTECH'S ``SECOND NATURE'' PATENTS: IMPLICATIONS FOR THE GLOBAL SOUTH 
14 (June 2005), http://www.etcgroup.org/documents/
Com8788SpecialPNanoMar-Jun05ENG.pdf (last visited Oct. 28, 2005). See 
also Allison et al., supra note --, at -- 
(discussing exclusive licenses of software patents by universities).
    \21\ See, e.g., Amy Rachel Davis, Patented Embryonic Stem Cells: 
The Quintessential ``Essential Facility''?, 94 Geo. L.J. 205 (2005); 
Ryan Fujikawa, Federal Funding of Human Embryonic Stem Cell Research: 
An Institutional Examination, 78 S. Cal. L. Rev. 1075 (2005). Those 
patents are now under reexamination at the PTO, however, and WARF has 
significantly eased its licensing restrictions, particularly for 
academic research. For a discussion, see Antonio Regaldo & David P. 
Hamilton, How a University's Patents May Limit Stem-Cell Research, Wall 
St. J., July 18, 2006, at B1.
---------------------------------------------------------------------------
    In fact, however, this higher royalty rate may or may not translate 
into a higher revenue stream for the university. Whether it does 
depends on the nature of the technology being licensed. For certain 
basic building blocks--what I call ``enabling technologies''--opening 
up licensing to many innovators who can develop different uses will 
generate substantial improvements, while giving an exclusive license to 
only one person will generate fewer improvements.\22\ And exclusive 
licenses can block any development of a technology if the licensee 
doesn't deliver.\23\ Even if in the long run non-exclusive licensing of 
many technologies actually increases university revenue, in the short 
run a university tech-transfer office seeking to maximize the amount of 
money that the office generates will tend to grant exclusive licenses. 
Exclusive licenses aren't necessarily bad--a point I discuss below--but 
they raise concerns about the effective diffusion of new technologies.
---------------------------------------------------------------------------
    \22\ I have made this argument in detail elsewhere, see, e.g., Mark 
A. Lemley, Property, Intellectual Property, and Free Riding, 83 Tex. L. 
Rev. 1031 (2005), and I won't repeat it here.
    \23\ Rochelle Dreyfuss relates the story of Johns Hopkins' ill-
fated exclusive license to Baxter for a patent that it didn't use. The 
exclusivity of the license prevented CellPro, which independently 
developed a commercial use for the invention, from licensing it from 
the university. See Rochelle Dreyfuss, Unique Works/Unique Challenges 
at the Intellectual Property/Competition Law Interface 5 (working paper 
2005), available at http://papers.ssrn.com/sol3/
papers.cfm?abstract-id=763688
---------------------------------------------------------------------------
    A final reason for industry concern about university patenting is 
that universities are increasingly enforcing their patents. Recent 
years have seen high-profile cases litigated to judgment by the 
University of California, the University of Rochester, Harvard, MIT, 
Columbia and Stanford, and suits filed by many other universities. One 
notable example is Eolas Technologies v. Microsoft,\24\ in which the 
University of California licensed a software patent to a company that 
really does look like a patent troll however you want to define that 
term, and then shared with that company a jury award of $535 million 
against Microsoft.\25\
---------------------------------------------------------------------------
    \24\ 399 F.3d 1325 (Fed. Cir. 2005).
    \25\ Id. at --. A more recent high-profile case involved 
the Harvard-MIT patent successfully enforced against Eli Lilly for $65 
million. See Brian Kladko, Ariad, research institutes win patent-
infringement case against Eli Lilly, http://boston.bizjournals.com/
boston/stories/2006/05/01/daily48.html. For documenting of other cases, 
see John R. Allison et al., University Software Ownership: Hold-Up or 
Technology Transfer (working paper 2006); Rowe, supra note 
--, at 936-37.
---------------------------------------------------------------------------
    Universities, recognizing patent licensing and litigation as an 
important revenue source in the modern environment, have been active in 
politics, largely in alignment with the life sciences industries (from 
which most university patent revenue comes) in opposing most of the 
effective pieces of draft patent reform legislation. Universities 
helped argue for eliminating from the 2005 patent reform bill any 
restrictions on both injunctive relief and continuation applications. 
The most recent version of the patent reform bill\26\ also faced 
attacks from some universities seeking to eliminate the move to first 
inventor to file, which doesn't benefit them because they tend to file 
later than commercial entities, and eliminate the creation of prior 
user rights, which also don't benefit them since they aren't generally 
using the inventions. These university preferences shouldn't be 
surprising, at least if we view the university as a profit-maximizing 
entity rather than one concerned with the social good. Like other non-
manufacturing entities, after all, universities are first and foremost 
intellectual property (IP) owners, not IP licensees.
---------------------------------------------------------------------------
    \26\ The Coalition Draft of H.R. 2795, 109th Cong., 1st Sess. 
(2005).
---------------------------------------------------------------------------
    The result is a felt sense among a lot of people that universities 
are not good actors in the patent system. Given the difficulty anyone 
has had in defining a patent troll, it is easy to move from that 
conclusion to the idea that universities are trolls too. I think it is 
worth questioning that leap. There is something going on here, but I'm 
not sure that it is reasonable to equate university patents with 
private troll behavior. The common refrain in complaints about patent 
trolls is that they are not contributing anything to society, but 
rather obtaining and asserting patents covering technology 
independently developed by defendants. The question remaining to be 
answered is whether the same is true of university patents. In other 
words, it's worth asking whether society needs or wants university 
patents at all.

II. Do We Need University Patents?

    From the perspective of the university, one justification for 
university patents may be to fund universities. More money is better 
than less money, and the billion dollars a year in licensing is a 
substantial new revenue source for universities, most of which goes to 
research and some of which goes to education. If you think those things 
are under-funded in our society today, as I tend to believe, generating 
that additional revenue sounds useful in a way that paying for-profit 
licensing shops doesn't. But that additional revenue is not costless. 
It's money that comes out of industry pockets, and at least some of 
that money otherwise would have gone into industry research and 
development, or to selling better products, or to providing products 
more cheaply. So it's worth thinking about the costs of patents as a 
pure wealth transfer mechanism. And most economists would agree that if 
our goal is to adequately fund higher education, patent litigation is 
an inefficient way of doing so.\27\ Further, there are some who claim 
that a culture of patenting imposes costs on the university or on 
academic research more generally.\28\ University scientists focused on 
patenting may delay or even forego publication in favor of IP 
protection.\29\ And there is a substantial literature on how the shift 
to university patenting has actually moved universities away from basic 
research and towards more applied research in ways that are arguably 
bad for society in the long run.\30\ The risk is not so much that 
individual professors will change their research habits as that the 
departments that grow and the hiring slots that become available will 
go to those who engage in revenue-generating applied research. Of 
course, government and private foundation grants can come with 
conditions attached, and can also direct research to particular ends, 
so in practice they aren't perfect funding mechanisms either.
---------------------------------------------------------------------------
    \27\ A general tax is a cheaper method of wealth transfer than 
specific assessments. See, e.g., Alan J. Auerbach & Lawrence J. 
Kotlikoff, Dynamic Fiscal Policy (1987).
    \28\ See generally Jennifer Washburn, University, Inc.: The 
Corporate Corruption of Higher Education (2005).
    \29\ See Mowery et al., supra note --, at --. 
Margo Bagley has documented this problem and proposed giving university 
inventors more time to file patent applications after publishing 
articles in the hopes of eliminating it. See Margo A. Bagley, Academic 
Discourse and Proprietary Rights: Putting Patents in Their Proper 
Place, 47 B.C. L. Rev. 217 (2006).
    \30\ Mowery et al., supra note --, at --; 
Arti Kaur Rai, Regulating Scientific Research: Intellectual Property 
Rights and the Norms of Science, 94 Nw. U. L. Rev. 77 (1999); Arti K. 
Rai & Rebecca S. Eisenberg, Bayh-Dole Reform and the Progress of 
Biomedicine, 66 L. & Contemp. Probs. 289 (2003); Rebecca S. Eisenberg, 
Proprietary Rights and the Norms of Science in Biotechnology Research, 
97 Yale L.J. 177 (1987); Brett M. Frischmann, Commercializing 
University Research Systems in Economic Perspective: A View From the 
Demand Side, in Libecap ed., supra note --, at 155, 176-78.
---------------------------------------------------------------------------
    Why else might society need university patents? The classic 
justification for patents--creating incentives to innovate--arguably 
isn't nearly as important in the university context as in the private 
sector. I think it unlikely that university scientists would not do 
research or invent in the absence of patent protection. There are 
plenty of other incentives for university scientists to engage in 
research, including curiosity, academic prestige, and tenure and 
promotion. Further, university inventors are generally funded by grants 
or departmental revenue, must assign their rights to the 
university,\31\ and don't necessarily see any tangible benefit from 
university patenting of their inventions. Now, this doesn't necessarily 
mean that patents have no additional effect. It may be that patents 
generate some revenue which is refunded to the researcher's department 
and supports further research, and even that the prospect of that 
additional funding motivates some research. But the contribution of 
patents to university incentives to innovate seems smaller than in 
profit-driven companies.
---------------------------------------------------------------------------
    \31\ See generally Corynne McSherry, Who Owns Academic Work? 
Battling for Control of Intellectual Property (2001).
---------------------------------------------------------------------------
    The final reason we might want university patents--and the argument 
that actually prevailed in the Congressional debates over Bayh-Dole--is 
the commercialization argument. Unlike the classic incentive story, 
commercialization theory argues that it is not so much the act of 
invention but the act of turning that invention into a marketable 
product that requires investment and therefore the exclusion of 
competition.\32\ According to this theory, university inventions will 
languish and not be commercialized unless we give someone--initially 
the university, but presumably eventually a private company to which 
the right is licensed or transferred--control over the invention and 
therefore incentive to invest in developing and marketing it. This 
argument seems particularly strong with respect to university 
inventions, since we can reasonably expect those inventions involve 
more basic research, and therefore to be made at an earlier stage, than 
private inventions.
---------------------------------------------------------------------------
    \32\ See, e.g., F. Scott Kieff, Facilitating Scientific Research: 
Intellectual Property Rights and the Norms of Science, 95 Nw. U. L. 
Rev. 691 (2001); Edmund Kitch, The Nature and Function of the Patent 
System, 20 J. L. & Econ. 265 (1977); John F. Duffy, Rethinking the 
Prospect Theory of Patents, 71 U. Chi. L. Rev. 439 (2004); Michael 
Abramowicz, The Problem of Patent Underdevelopment, http://
papers.ssrn.com/sol3/papers.cfm?abstract-id=873473
---------------------------------------------------------------------------
    There is some debate as to whether the commercialization theory is 
actually true of university inventions. Mowery, Nelson, Sampat, and 
Ziedonis have a very interesting book in which they suggest that Bayh-
Dole was based on concerns that were mis- or at least overstated. They 
argue that there was a good deal of technology-transfer without 
university patents in the decades before Bayh-Dole, and that even today 
there is plenty of university technology transfer that occurs in the 
absence of patents.\33\ By contrast, the prevailing wisdom seems to be 
that university patents increase commercialization, and therefore that 
Bayh-Dole has been a success.\34\ Certainly they increase 
commercialization deals between universities and companies,\35\ though 
it is hard to know the extent to which that simply reflects the fact 
that once a patent issues the company in question needs a license in 
order to commercialize the technology.
---------------------------------------------------------------------------
    \33\ Mowery et al., supra note --, at --. 
Inferential empirical evidence for this is provided by Daniel 
Elfenbein, who shows that the majority of technologies developed at 
Harvard are licensed before the grant of patent rights, and often 
without a patent application. Daniel W. Elfenbein, Publications, 
Patents, and the Market for University Inventions 2, 4-5 (working paper 
2005). See also Rebecca S. Eisenberg, Public Research and Private 
Development: Patents and Technology Transfer in Government-Sponsored 
Research, 82 Va. L. Rev. 1663 (1996) (discussing ways in which patents 
do and do not promote commercialization of university research). One of 
the leading objections to university patenting comes from Katherine J. 
Strandburg, Curiosity-Driven Research and University Technology 
Transfer, in 16 Advances in the Study of Entrepreneurship, Innovation, 
and Economic Growth: University Entrepreneurship and Technology 97 
(2005). By contrast, others--led by university organizations 
themselves--cite data claiming that Bayh-Dole has been an enormous 
success. See, e.g., Chester G. Moore, Killing the Bayh-Dole Act's 
Golden Goose, 8 Tulane J. Tech. & Intell. Prop. 151, 155-57 (2006). For 
an analysis of both the benefits and costs, see Siepmann, supra note 
--, at 230-38.
    \34\ See, e.g., Wendy H. Schacht, Congressional Research Service 
Report: The Bayh-Dole Act: Selected Issues in Patent Policy and the 
Commercialization of Technology, available at http://
www.ncseonline.org/NLE/CRSreports/07Jan/RL32076.pdf
    \35\ Daniel W. Elfenbein, Publications, Patents, and the Market for 
University Inventions, working paper (April 30, 2006), available at 
http://papers.ssrn.com/sol3/papers.cfm?abstract-id=739227
---------------------------------------------------------------------------
    My own view is that the validity of commercialization theory 
depends a great deal on the industry in question and the particular 
nature of the technology. In the pharmaceutical and biotechnology 
industries, where coming up with an invention is only the first step 
down a very long road of regulatory process that's going to take 
hundreds of millions of dollars and several years, the 
commercialization argument makes some sense. The university generally 
isn't going to engage in that regulatory process, and arguably we need 
to give somebody exclusive rights to induce them to make the regulatory 
investments that the university itself isn't going to make. We give the 
right to the university, but we do so expecting that they will transfer 
or exclusively license that right to a private company that will recoup 
the hundreds of millions of dollars they spend in clinical trials, 
product development, and marketing.\36\ Other industries might also 
have a long post-invention development cycle and therefore be good 
candidates for commercialization theory. That might be true of basic 
building block technologies like nanotechnology, where we expect a very 
long road between the development of the invention and the ultimate 
commercialization,\37\ though it is likely too early to say for sure 
how nanotech will develop. In these industries, Bayh-Dole is probably a 
good thing.
---------------------------------------------------------------------------
    \36\ Interestingly, though, even industry players in the 
pharmaceutical industry sometimes lament university reliance on 
exclusive licensing. See Thomas J. Siepmann, The Global Exportation of 
the U.S. Bayh-Dole Act, 30 U. Dayton L. Rev. 236 (2004) (quoting Joshua 
Kalkstein, corporate counsel for Pfizer).
    \37\ Lemley, supra note --, at 628-29.
---------------------------------------------------------------------------
    On the other hand, I'm quite confident that central control is not 
necessary to produce commercialization in the majority of other 
industries.\38\ Bear in mind that the commercialization story is at 
base anti-market: it assumes, contrary to centuries of economic 
learning, that ordinary profit motives will not produce efficient 
allocation of resources and that we need to vest exclusive control of a 
technology or market in one actor in order to get that efficient 
allocation.\39\ Even if we think that's true in the pharmaceutical or 
biotechnology industries because of the regulatory barriers to entry in 
those markets, we should not conclude exclusivity is always or even 
generally required to encourage a company to bring a product to 
market.\40\ In the IT industries, and even in industries like medical 
devices, there is no reason to believe that exclusive rights are 
necessary to encourage commercialization of the technology. It is true 
even in those industries that when an inventor has gotten to the point 
where she can patent something, there may still be development and 
marketing work to be done. But we get plenty of both in a competitive 
marketplace because the companies who engage in product development and 
marketing can reap enough of the benefits of that investment to make it 
worthwhile. And indeed we have seen an enormous number of technologies 
commercialized out of universities throughout the 20th Century without 
need of university patents. Think of the computer, the world-wide-web, 
search engines, relational databases, and any number of software 
programs.\41\
---------------------------------------------------------------------------
    \38\ Empirical evidence supports the conclusion that patenting 
reduces rather than increases technology diffusion overall. Murray and 
Stern find that patenting is associated with reduced citation to an 
academic publication associated with the patent. Fiona Murray & Scott 
Stern, Do Formal Intellectual Property Rights Hinder the Free Flow of 
Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis 
(working paper 2005), available at http://papers.ssrn.com/sol3/
papers.cfm?abstract-id=755701. Were commercialization theory 
true, it should be the opposite.
    \39\ See Mark A. Lemley, Ex Ante Versus Ex Post Justifications for 
Intellectual Property, 71 U. Chi. L. Rev. 147 (2004) (making this 
point).
    \40\ More and more property rights scholars seem to forget the 
benefits of a market economy. Michael Abramowicz, for instance, claims 
that we may not get efficient entry of Indian restaurants into 
particular neighborhoods unless we grant some sort of regional 
exclusivity. Abramowicz, supra note --, at --. 
Maybe he's right, but I doubt it. The market has worked pretty well in 
the past, and we should be reluctant to forego its benefits unless 
we're quite sure that the alternative will be better.
    \41\ For a detailed discussion of one example, Apache, see Jay P. 
Kesan & Rajiv C. Shah, Shaping Code, 18 Harv. J. L. & Tech. 320, 394-96 
(2005).
---------------------------------------------------------------------------
    The need for university patents, in short, depends critically on 
the technology at issue. I think much of the industry frustration with 
the role of university patents stems from the failure of some 
university technology transfer offices to recognize and adapt to these 
technology differences. As noted above, technology transfer offices 
have strong incentives to maximize revenue from patent licensing. To 
achieve this, they have adopted the life sciences model, where 
exclusive rights and patents seem to make sense because of the 
regulatory delays, as their general approach to patent licensing. But 
they are increasingly using it in software and other information 
technologies.\42\ The result is frustration on the part of industry 
counterparts in industries like computers or telecommunications that 
are more interested in freedom to operate than in exclusive rights over 
a new technology. It may also be frustration on the part of tech 
transfer offices; less than one percent of all university patent 
licenses generate over $1 million in revenue.\43\ And efforts to 
commercialize the rest is what leads to a lot of the more worrisome 
patent licenses in cases like Eolas.
---------------------------------------------------------------------------
    \42\ See John R. Allison et al., University Software Ownership: 
Hold-Up or Technology Transfer (working paper 2006) (documenting the 
growth in university software patenting).
    \43\ Jerry G. Thursby & Marie C. Thursby, University Licensing and 
the Bayh-Dole Act, 301 Sci. 1052, 1052 (2003) (0.56 percent).
---------------------------------------------------------------------------

III. Lessons From the University Patent Experience

A. Towards an Enlightened University Patent Policy
    Universities should take a broader view of their role in technology 
transfer. University technology transfer ought to have as its goal 
maximizing the social impact of technology, not merely maximizing the 
university's licensing revenue.\44\ A university is more than just a 
private for-profit entity. It is a public-regarding institution that 
should be advancing the development and spread of knowledge and the 
beneficial use of that knowledge. Sometimes those goals will coincide 
with the university's short-term financial interests. Sometimes 
universities will maximize the impact of an invention on society by 
granting exclusive licenses for substantial revenue to a company that 
will take the invention and commercialize it. Sometimes, but not 
always. At other times a non-exclusive license, particularly on a basic 
enabling technology, will ultimately maximize the invention's impact on 
society by allowing a large number of people to commercialize in 
different areas, to try out different things and see if they work, and 
the like.\45\ Universities can still earn revenue from nonexclusive 
licenses, and for enabling technologies they might even maximize their 
revenue in the long-term by granting nonexclusive rather than exclusive 
licenses.\46\ University policies might be made more nuanced than 
simply a choice between exclusive and nonexclusive licenses. For 
example, they might grant field-specific exclusivity, or exclusivity 
only for a limited term, or exclusivity only for commercial sales while 
exempting research,\47\ and they might condition continued exclusivity 
on achievement of certain dissemination goals.\48\ Finally, 
particularly in the software context, there are many circumstances in 
which the social impact of technology transfer is maximized either by 
the university not patenting at all or by granting licenses to those 
patents on a royalty-free basis to all comers.\49\ Open source software 
development is one example, but hardly the only one.\50\
---------------------------------------------------------------------------
    \44\ For a similar view, see Robert E. Litan et al., 
Commercializing University Inventions: A Better Way, NBER Working Paper 
(April 2007).
    \45\ See Lemley, Nanotechnology, supra note --, at 
--; Ted Sabety, Nanotechnology Innovation and the Patent 
Thicket: Which IP Policies Promote Growth?, 15 Alb. L.J. Sci. & Tech. 
477, 510-12 (2005) (both making this argument).
    \46\ The key university patents on enabling technologies in 
biotechnology, issued to Cohen and Boyer for the creation of chimeric 
organisms and to Axel for methods of inserting genes into a cell, were 
licensed nonexclusively because of NIH requirements. See Wysocki, supra 
note --, at A1. They made enormous sums of money for 
Stanford, UC, and Columbia, arguably because, not in spite of, the 
nonexclusivity of the licenses. See Sally Smith Hughes, Making Dollars 
Out of DNA: The First Major Patent in Biotechnology and the 
Commercialization of Molecular Biology, 1974-1980, 92 ISIS 541, 570 & 
n.77 (2001); Wysocki, supra note --, at A12. Amy Kapczynski 
has argued that open licensing may be profitable for universities more 
generally, not just with enabling technologies. Amy Kapczynski et al., 
Addressing Global Health Inequities: An Open Licensing Approach for 
University Innovations, 20 Berkeley Tech. L.J. 1031, 1040 (2005). I am 
less persuaded by this broader argument.
    \47\ For examples of such approaches, including Stanford's and 
WARF's, see Ritchie de Larena, supra note --, at 1420.
    \48\ Stanford University has a relatively enlightened university 
technology transfer policy that uses all of these intermediate 
mechanisms. Conversations with Linda Chao, Stanford Office of 
Technology Licensing (May 2006). Stanford's official policy is at 
http://otl.stanford.edu/inventors/resources/otlandinvent.html
    \49\ For a general argument along these lines, see Brett M. 
Frischmann, An Economic Theory of Infrastructure and Commons 
Management, 89 Minn. L. Rev. 917 (2005). See Stanford Office of 
Technology Licensing Policies, http://otl.stanford.edu/inventors/
policies.html#research (``Inventors may place their inventions in the 
public domain if they believe that would be in the best interest of 
technology transfer''). And some have argued for open licensing of 
university pharmaceutical inventions in the developing world. See, 
e.g., Amy Kapczynski et al., Addressing Global Health Inequities: An 
Open Licensing Approach for University Innovations, 20 Berkeley Tech. 
L.J. 1031 (2005). By contrast, Arti Rai documents the difficulties 
scientists have had persuading universities to build an open source 
model for collaborative biotechnology research. See Arti K. Rai, ``Open 
and Collaborative'' Biomedical Research: Theory and Evidence 29, 35-36 
(working paper 2005).
    \50\ For a useful step in this regard, see http://www.kauffman.org/
entrepreneurship.cfm?topic=innovation&itemID=662 (setting out 
principles agreed to by corporations and several major universities for 
making software inventions freely available).
---------------------------------------------------------------------------
    If we are to achieve the goal of maximizing the social benefit of a 
university invention to society, universities must first recognize 
their proper role in society and how that role affects patent policies. 
An important first step in that education process is to end the 
isolation of university technology transfer or licensing offices from 
the rest of the university.\51\ If universities treat licensing offices 
as revenue generation devices, evaluated on how much money they bring 
in each quarter, the result will be university patent policies that are 
not always or even often consonant with the ultimate public 
interest.\52\ The problem is even worse if universities outsource their 
technology transfer functions altogether to private licensing 
shops.\53\ If a university thinks of its role in society as a whole, if 
it treats patent licensing as one aspect of a broader technology 
transfer policy, it can and should develop more enlightened policies. A 
number of universities have taken significant steps in this regard, but 
more remains to be done.
---------------------------------------------------------------------------
    \51\ For a discussion of the various ways in which university tech-
transfer offices are organized today, see Ritchie de Larena, supra note 
--, at 1413.
    \52\ See Ritchie de Larena, supra note --, at 1416-17 
(``One point that most technology-transfer managers agree upon is that 
it is not wise to judge a university's technology-transfer office 
solely on licensing income.'').
    \53\ For example, the University of Colorado has outsourced much of 
its patent licensing to Competitive Technologies Inc.
---------------------------------------------------------------------------
B. Legal Constraints on Unenlightened Universities
    If universities don't develop such policies voluntarily, society 
may have other mechanisms to ensure that university patents don't 
impede innovation. Federal funding agencies can play a role. The 
National Institutes of Health has at various times in the past imposed 
mandates requiring universities to grant certain types of licenses to 
their work.\54\ The Bayh-Dole Act permits the government to exercise 
``march-in rights,'' requiring that particular patents be licensed on 
non-exclusive terms.\55\ Alternatively, as universities become more and 
more vulnerable to patent infringement suits themselves,\56\ private 
sector patent owners may be able to create some of the symmetry that 
drives cross-licenses in industries like semiconductors by obtaining 
patents that universities infringe and threatening to assert them 
against any university who sues them for patent infringement.\57\ These 
measures might turn out to be necessary, but I'd like to see us try 
first to solve the problem not by imposing a solution, but by 
encouraging universities to take the first step in recognizing their 
social responsibility associated with their patents.
---------------------------------------------------------------------------
    \54\ See Bernard Wysocki Jr., College Try: Columbia's Pursuit of 
Patent Riches Angers Companies, WALL ST. J., Dec. 21, 2004, at A1 
(noting that the NIH required Professor Axel at Columbia to license his 
fundamental patents on methods of inserting genes into cells 
nonexclusively and at a reasonable royalty).
    \55\ 35 U.S.C.  209.
    \56\ See, e.g., Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 
2002).
    \57\ There may be practical reasons why this last option is 
unlikely, however. See Elizabeth A. Rowe, The Experimental Use 
Exception to Patent Infringement: Do Universities Deserve Special 
Treatment? 57 Hastings L.J. 921, 940-44 (2006).
---------------------------------------------------------------------------
C. Broader Lessons: Who Is a Patent Troll?
    Finally, I think we can learn something about the raging debate 
over who's a patent troll and what to do about trolls by looking at 
university patents. Universities are non-practicing entities. They 
share some characteristics with trolls, at least if the term is broadly 
defined, but they are not trolls. Asking what distinguishes 
universities from trolls can actually help us figure out what concerns 
us about trolls. One of the differences between universities and 
private licensing shops is that universities are by and large not 
engaged in hiding the ball, waiting until people have developed an 
industry and then popping up and demanding a disproportionate share of 
royalties based on irreversible investments.\58\ There are occasional 
examples of that,\59\ and they should be condemned, but it's not the 
ordinary case with a university license. Instead, most university 
licenses have a major technology transfer component. A nonexclusive 
patent license is effectively nothing more than forbearance from suit 
in exchange for money.\60\ By contrast, most university licenses give 
the licensee not just the right to avoid a lawsuit, but also provide 
valuable know-how. Indeed, many also involve continued work by the 
inventor, particularly if the license is to a start-up and is 
exclusive. That sort of technology transfer is something we want to 
encourage for reasons Rob Merges has explained: granting IP rights 
allows us not to be constrained by a particular definition of the firm 
and forced do all of our innovation in house. It allows us to have 
markets for technology.\61\ Markets for technology contribute more to 
society than markets for litigation rights.\62\ University patent 
owners aren't trolls in my view when they contribute previously unknown 
technology to society, rather than just imposing costs on others by 
obtaining and asserting legal rights over inventions independently 
developed by others.\63\
---------------------------------------------------------------------------
    \58\ On this problem, see Lemley, supra note --; Lemley 
& Shapiro, supra note --.
    \59\ For a discussion of a submarine patent strategy employed by 
Columbia University, see Ritchie de Larena, supra note --, 
at 1417-18.
    \60\ See, e.g., Intellectual Prop. Dev., Inc. v. TCI Cablevision, 
248 F.3d 1333, 1345 (Fed. Cir. 2001) (describing a nonexclusive license 
as nothing more than a ``covenant not to sue'').
    \61\ See Robert P. Merges, A Transactional View of Property Rights, 
20 Berkeley Tech. L.J. 1477 (2005).
    \62\ See generally Ashish Arora et al., Markets for Technology 
(2001) (noting the contributions of technology markets).
    \63\ Indeed, Jerry and Marie Thursby argue that the continued role 
of the inventor in technology transfer is critical to the success of 
university licenses. Jerry G. Thursby & Marie C. Thursby, Are Faculty 
Critical? Their Role in University-Industry Licensing (NBER Working 
Paper 2003).
---------------------------------------------------------------------------
    In the abstract, I think we could successfully define patent trolls 
by distinguishing between cases in which non-manufacturing entities 
license only the right not to be sued from cases in which the patent 
owner actually engages in technology transfer. But that's only in the 
abstract. Were a court ever to announce such a definition, it would 
immediately be gamed. All true trolls would start passing on some 
mandatory know-how along with their patent licenses, in order to avoid 
being categorized as trolls.
    What we ought to do instead is abandon the search for a group of 
individual companies to define as trolls. We shouldn't focus on the 
question of who is per se a bad actor. In my view, troll is as troll 
does. Universities will sometimes be bad actors. Nonmanufacturing 
patent owners will sometimes be bad actors. Manufacturing patent owners 
will sometimes be bad actors. Instead of singling out bad actors, we 
should focus on the bad acts and the laws that make them possible. We 
will solve the troll problem not by hunting down and eliminating 
trolls, but by hunting down and eliminating the many legal rules that 
facilitate the capture by patent owners of a disproportionate share of 
an irreversible investment. We should focus on reform of current 
continuation practice, which allows patent owners to hide the true 
nature of their invention until late in the process and facilitates 
their later claiming to have invented something they did not.\64\ We 
should focus on reform of the willfulness doctrine, under which a 
patent owner can get treble damages from an independent inventor merely 
by telling them about the patent and which has the perverse effect of 
causing people to try to avoid learning of patents.\65\ We should focus 
on reform of royalty calculation rules that give a disproportionate 
award of damages to patent owners in component industries because they 
don't adequately take account of the contributions of other aspects of 
the invention.\66\ And we should take the opportunity presented by the 
Supreme Court's eBay decision\67\ to craft intelligent standards for 
deciding when to grant injunctive relief. If we change the rules that 
make patent hold-up such an attractive revenue generator, we won't have 
to worry about the question of whether or not universities--or anyone 
else--are patent trolls. We will have eliminated the problem of 
opportunistic behavior that interferes with innovation, something we 
want to stop regardless of what we call it.
---------------------------------------------------------------------------
    \64\ See, e.g, Mark A. Lemley & Kimberly A. Moore, Ending Abuse of 
Patent Continuations, 84 B.U. L. Rev. 63 (2004). The Patent and 
Trademark Office has proposed to take significant steps to limit 
continuations, though whether the proposals will be implemented is 
uncertain at this writing. See United States Patent and Trademark 
Office, Changes to Practice for Continuing Applications, Requests for 
Continued Examination Practice, and Applications Containing Patentably 
Distinct Claims, 71 Fed. Reg. 48 (Jan. 3, 2006).
    \65\ See, e.g., Mark A. Lemley & Ragesh K. Tangri, Ending Patent 
Law's Willfulness Game, 18 Berkeley Tech. L.J. 1085 (2003) (identifying 
this problem and proposing changes to deal with it). H.R. 2795, pending 
at this writing, would make it much more difficult to plead 
willfulness.
    \66\ See Lemley & Shapiro, supra note --.
    \67\ eBay, Inc. v. MercExchange LLC, 126 S.Ct. 1837 (2006).

                      Biography for Mark A. Lemley
    Widely recognized as a preeminent scholar of intellectual property 
law, Mark Lemley is a prolific writer, having published over 70 
articles and six books, and an accomplished litigator, having tried 
cases before the U.S. Supreme Court, the California Supreme Court, and 
federal district courts. His major contributions to legal scholarship 
focus on how the economics and technology of the Internet affect patent 
law, copyright law, and trademark law. Professor Lemley has testified 
numerous times before Congress and the California legislature on 
patent, trade secret, antitrust, and constitutional law matters and 
currently serves as of counsel at Keker & Van Nest in their 
intellectual property and antitrust divisions. Before joining the 
Stanford Law School faculty in 2004, he was a Professor of Law at the 
University of California at Berkeley School of Law (Boalt Hall) and at 
the University of Texas School of Law, and served as of counsel at Fish 
& Richardson. He clerked for Judge Dorothy W. Nelson of the U.S. Court 
of Appeals for the Ninth Circuit.

    Chairman Wu. Thank you very much, Dr. Lemley, and I will 
not relay your comments to your colleagues at Stanford. Dr. 
Allen, please proceed.

  STATEMENT OF DR. MARK G. ALLEN, JOSEPH M. PETTIT PROFESSOR; 
REGENTS PROFESSOR, GEORGIA INSTITUTE OF TECHNOLOGY; CO-FOUNDER 
     & CHIEF TECHNOLOGY OFFICER, CARDIOMEMS, INC., ATLANTA

    Dr. Allen. Chairman Wu, Ranking Member Gingrey, and Members 
of the Subcommittee, my name is Dr. Mark Allen. I am a 
Professor of Electrical and Computer Engineering at Georgia 
Tech, and I am pleased to be here to address you today.
    As we have heard, this hearing has focused on the next 25 
years of technology transfers governed by the Bayh-Dole Act, 
and in order to comment on the next quarter century, I would 
like to focus on my past experiences as a researcher and 
transferor of technology, and what this, perhaps, has taught 
me. And I think that this experience also reflects upon some of 
the questions the subcommittee has asked.
    Some years ago, I was sponsored in my Georgia Tech capacity 
by the Department of Defense on the topic of intelligent 
turbine engines. This was a university interdisciplinary 
research program administered by the Department of Defense, and 
my portion of the project was to develop a pressure sensor that 
could be used in particular locations in jet engines to allow 
optimal engine performance. I worked with a Ph.D. student, and 
we designed, fabricated, and tested a new type of pressure 
sensor that was small. It would operate in harsh environments, 
and able to be communicated with in a wireless fashion.
    The results of my research were provided to the Department 
of Defense, and are currently being built upon by NASA, and in 
addition, the research results were patented by Georgia Tech, 
in accordance with the provisions of the Bayh-Dole Act. 
Conference publications, journal publications, and a Ph.D. 
thesis were all written on this work, and were all disseminated 
as an ongoing part of the academic research, and the patenting 
did not interfere with that in any way.
    I began discussions a few years later with a medical 
doctor, who was interested in adapting new technologies to 
create the next generation of medical devices, and after 
several discussions, we noted that the pressure sensor that we 
developed for harsh environments in engines might also be 
applicable in another harsh environment, the human body.
    We formed a company called CardioMEMS, dedicated to 
commercialization of this technology. CardioMEMS licensed some 
of the key patents, including the two cited from this DOD 
program, exclusively in a specific field, that of medical 
devices. Based on these patents, CardioMEMS engineers further 
developed wireless sensors to monitor aneurysms that have been 
repaired by physicians, and the sensors are used to provide 
information to the physicians, so they can monitor whether 
aneurysm repair is working.
    The government funding provided by DOD, that was directed 
to the development of the sensor, was approximately half a 
million dollars, and today, CardioMEMS has received 
approximately $50 million in private equity investment, so that 
is a ratio of about $100 of private investment for each dollar 
of government investment. The company currently employs over 
100 people. Its sensors are FDA approved, and in fact, we are 
cited in the 2005 FDA annual report as an example of a device 
``that we believe will have a particular impact on patient 
care.''
    Having clear access to the intellectual property developed 
in the academic laboratory, through the mechanism of the Bayh-
Dole Act, was the prerequisite for CardioMEMS' success, because 
as many of us know, in order to secure venture funding, it is 
necessary to have clear intellectual property rights to the 
inventions being developed.
    Speaking more generally, the benefits of Bayh-Dole are 
numerous and well documented. One of the most significant 
contributions in the Act may be that it ensures 
nondiscriminatory access to and benefit from the technologies 
that result from our public investment in university research. 
This allows the creation of, in the United States, of new 
products, new companies, and new markets. In 2003, the 
President's Council of Advisors on Science and Technology 
affirmed the success of the Bayh-Dole Act, and noted that other 
nations are attempting to replicate this model.
    Another significant benefit of Bayh-Dole, and one that we 
might think about in our discussions of industry-wide 
differentiation, is the flexibility of the law. By not 
constraining the use of Bayh-Dole, a variety of approaches, 
including exclusive and nonexclusive licensing, exclusive 
licensing in fields of use, such as the CardioMEMS example, 
which did not preclude further licensing in areas such as jet 
turbine engines, and also, the use of territories, universities 
and companies are able to tailor their agreements for specific 
industries, technologies, and applications, under the existing 
legislation.
    Today, U.S. industry continues to face competitive 
pressures globally, and the need for basic research as the 
foundation of innovation still exists. While cultural 
differences sometimes strain collaboration between industry and 
academia, I firmly believe the Bayh-Dole Act has helped foster 
a new and highly successful era of collaboration, by 
establishing a uniform federal invention policy, encouraging 
universities to develop relationships with industry through 
commercialization of inventions, and establishing preference 
for manufacturing of products in the United States.
    Based on the objective numerical successes of the Act, as 
well as my own personal experiences with CardioMEMS, I feel 
strongly we should not alter in any significant way the 
legislation that has been so successful, and that the rest of 
the world is using as a model of innovation.
    In summary, thank you again for the opportunity to comment 
on my experiences, and on the topic of Bayh-Dole, and I would 
be happy to answer any questions.
    [The prepared statement of Dr. Allen follows:]
                  Prepared Statement of Mark G. Allen
    Mr. Chairman, Ranking Member Gingrey and Members of the 
Subcommittee, my name is Dr. Mark Allen and I am pleased to be able to 
present testimony to the Subcommittee on the topic of Bayh-Dole--The 
Next 25 Years. I received the SM and Ph.D. degrees from the 
Massachusetts Institute of Technology (M.I.T.) in 1986 and 1989 
respectively, and joined the faculty of the Georgia Institute of 
Technology\1\ (Georgia Tech) after a postdoctoral appointment at M.I.T. 
Currently I am Regents' Professor of Electrical and Computer 
Engineering at Georgia Tech, with a joint appointment in the School of 
Chemical and Biomolecular Engineering, and hold the J.M. Pettit 
Professorship in Microelectronics. Georgia Tech was founded in 1885 and 
is one of the Nation's top research universities, distinguished by its 
commitment to improving the human condition through advanced science 
and technology. Georgia Tech's campus occupies 400 acres in the heart 
of the city of Atlanta, where more than 17,000 undergraduate and 
graduate students receive a focused, technologically-based education. 
Georgia Tech also has satellite campuses worldwide. Georgia Tech's 
vision and mission is to define the technological research university 
of the 21st century, and educate the leaders of a technologically-
driven world.
---------------------------------------------------------------------------
    \1\ http://www.gatech.edu
---------------------------------------------------------------------------
    This hearing is focused on the next 25 years of technology transfer 
governed by the Bayh-Dole Act. In order to comment on the next quarter 
century, I will rely upon my past experience as a researcher and 
transferor of technology. This experience also reflects upon the 
questions the Subcommittee has asked of me.
    In the mid to late 1990s and in my capacity as a Georgia Tech 
professor I was involved with a Multi-disciplinary University Research 
Initiative (MURI) program on Intelligent Turbine Engines. As defined by 
the Department of Defense, ``The MURI program is a multi-agency DOD 
program that supports research teams whose efforts intersect more than 
one traditional science and engineering discipline. Multi-disciplinary 
team effort can accelerate research progress in areas particularly 
suited to this approach by cross-fertilization of ideas, can hasten the 
transition of basic research findings to practical applications, and 
can help to train students in science and/or engineering in areas of 
importance to DOD.'' \2\
---------------------------------------------------------------------------
    \2\ http://www.acq.osd.mil/ddre/research/muri/muri.htm
---------------------------------------------------------------------------
    The particular program was sponsored by the Army Research Office 
and was on the topic of ``Intelligent Turbine Engines.'' My portion of 
the project was to develop a pressure sensor that could be used in 
particular locations in the engine to provide control signals to ensure 
optimal engine performance. Working with a Ph.D. student, we designed, 
fabricated, and tested a new type of pressure sensor that was (1) small 
in size; (2) capable of operating in harsh environments, such as high 
temperature; and (3) capable of wireless interrogation.
    The results of my research were provided to the Army. In addition, 
the research results were patented by Georgia Tech\3\ in accordance 
with the provisions of the Bayh-Dole Act. Conference publications\4\, 
journal publications\5\, and a Ph.D. thesis\6\ were written and 
disseminated as an ongoing part of this academic research.
---------------------------------------------------------------------------
    \3\ U.S. Patents 6,111,520 and 6,278,379.
    \4\ English, J.M.; Allen, M.G., ``Wireless micromachined ceramic 
pressure sensors,'' Technical Digest, Twelfth IEEE International 
Conference on Micro Electro Mechanical Systems, pp. 511-16 (1999).
    \5\ Fonseca, M.A.; English, J.M.; von Arx, M.; Allen, M.G., 
``Wireless Micromachined Ceramic Pressure Sensor for High Temperature 
Applications,'' IEEE/ASME J. Microelectromechanical Systems, v. 11, no. 
4, pp. 337-43 (2002).
    \6\ English, J.M., ``Wireless micromachined ceramic pressure 
sensors for high temperature environments,'' Ph.D. Thesis, Georgia 
Institute of Technology (2000).
---------------------------------------------------------------------------
    In the 2000-2001 timeframe, I began discussions with a medical 
doctor who was interested in exploiting microelectromechanical systems 
(MEMS)-based manufacturing technologies to create a new generation of 
medical devices. Wireless sensors, that could sense disease states from 
within the body, were a particular interest area of both of us; from 
his perspective as a clinician and from mine as an engineer. After 
several discussions, we noted that the turbine engine sensor developed 
for harsh environments under the MURI research program might also be 
applicable in another harsh environment, the human body. We formed a 
company, Cardiomems\7\, dedicated to the commercialization of this 
technology. Cardiomems licensed key patents, including the two cited 
from the MURI project, exclusively in the field of medical devices. 
Based on these patents, Cardiomems engineers developed wireless sensors 
as monitors of endovascularly-repaired abdominal aortic aneurysms. The 
sensors are integrated with an external measurement antenna. A real-
time waveform of the pressure environment of the excluded aneurysm is 
extracted and provided to the physician to diagnose the state of the 
aneurysm repair.
---------------------------------------------------------------------------
    \7\ http://www.cardiomems.com
---------------------------------------------------------------------------
    The government funding provided by the Army Research Office that 
was directed to the development of this sensor was approximately 
$500,000. To date, Cardiomems has received approximately $50 million in 
private equity investment, a ratio of approximately $100 of private 
investment for each $1 of government investment. Cardiomems currently 
employs over 100 people. Its wireless pressure sensors for aneurysm 
sensing were cleared for sale in the United States by the FDA in late 
2005 and to date thousands of people have received them.
    One of the key due diligence reviews prior to any private equity 
investment is a thorough review of the intellectual property licensed 
by the company, and it was clearly stated by investors that a strong 
intellectual property position would be a prerequisite for any 
investment. Without this strong position, enabled by licensing the 
critical technologies from Georgia Tech, in my opinion it would have 
been impossible for the company to have raised funding for this 
product. Due in part to the strong IP position the company holds as 
enabled by the Bayh-Dole Act, the medical community now has available a 
commercial device that has helped thousands of people, won multiple 
awards, and was cited in the 2005 annual report of the Food and Drug 
Administration as a device ``that we believe will have a particular 
impact on patient care.'' \8\
---------------------------------------------------------------------------
    \8\ Office of Device Evaluation, Center for Devices and 
Radiological Health, U.S. Food and Drug Administration, 2005 Annual 
Report, pp. 1-4.
---------------------------------------------------------------------------
    To summarize this portion of my testimony, what these experiences 
have taught me is that the commercialization process has many 
challenges. By far the largest challenge is the development effort 
required to transform academic discoveries into useful, commercial, 
salable products (as I mentioned above, this effort at least for 
Cardiomems was in dollar terms approximately a 100:1 ratio), and 
includes not only further technical development, but also legal issues, 
raising funds, liability protection, and securing regulatory approval. 
However, before embarking on any of these additional challenges, and 
before raising the first dollar from private investments, Cardiomems 
negotiated for licenses to the intellectual property with the 
university holders. Having clear access to the intellectual property 
developed in the academic laboratory through the mechanisms of the 
Bayh-Dole Act was the prerequisite for Cardiomems' success.
    Although I have spoken previously from my viewpoint as an academic 
researcher and given a single example of Bayh-Dole-enabled success, it 
is clear that the Bayh-Dole Act has had a broad and profound effect on 
academic technology transfer more generally. In the first twenty-five 
years after its passage, there was a ten-fold increase in academic 
patent portfolios according to statistics maintained by the Association 
of University Technology Managers. If, as some have said, innovation is 
the intersection of invention and opportunity, this wave of innovation 
created 5,000 new businesses, 3,641 new products, and generated 300,000 
jobs.\9\ Annually, U.S. research universities and institutions receive 
about sixty-seven percent of their research funding from the Federal 
Government).\10\ Inevitably, simply because the vast majority of 
inventions in universities arise in the course of federally-funded 
projects, universities' obligations under Bayh-Dole will shape 
administrative systems for handling intellectual property, irrespective 
of the funding source.
---------------------------------------------------------------------------
    \9\ Data from the Association of University Technology Managers: 
www.autm.net
    \10\ Association of University Technology Managers' 2005 U.S. 
Licensing Survey.
---------------------------------------------------------------------------
    In the State of Georgia the economic impact of technology transfer 
activities at universities is profound. Georgia Tech ranked 9th on the 
U.S. Patent and Trademark Office's List of Top 10 Universities 
Receiving the Most Patents in 2005 (April 6, 2006). In announcing the 
list, Jon Dudas, Under Secretary of Commerce for Intellectual Property 
noted that ``America's economic strength and global leadership depend 
on continued technological advances. Ground-breaking discoveries and 
patented inventions generated by innovative minds at academic 
institutions have paid enormous dividends, improving the lives and 
livelihoods of generations of Americans.'' That certainly seems to be 
the case in Georgia. In our most recent fiscal year, Georgia Tech 
executed 42 licenses and options, most for more than one patent. In 
fiscal year 2006, ten new companies were formed based Georgia Tech 
technologies; between 2001 and 2006, that list includes 53 companies. 
Since 1999, companies from the Advanced Technology Development Center 
(ATDC)\11\, a business incubator that is part of Georgia Tech's 
Enterprise Innovation Institute, have raised over one billion dollars 
in venture capital. In 2006, 10 of the top 25 largest venture capital 
deals in Georgia--including the two largest--went to ATDC companies, 
representing 21 percent of investments in Georgia.
---------------------------------------------------------------------------
    \11\ http://www.atdc.org/overview.asp
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    The most significant contribution of the Act may be that it ensures 
non-discriminatory access to and benefit from the technologies that 
result from the public investment in university research. Small 
businesses receive preference under Bayh-Dole but the marketplace 
establishes the consideration for the license. As a condition of 
federal awards, universities are obligated to take steps to make 
nascent technologies available to the public by licensing them to 
entities that have the ability to bring them to the marketplace. 
Universities must ensure that licensees meet milestones for development 
of the technologies or products. Universities provide the government 
with a royalty-free right to use the technology for government 
purposes. Finally, in the relatively rare event that the university 
receives royalties under a license, its share of the funds may only be 
used to further research and the education of students. This 
reinvestment in research and education benefits both industry and the 
public through building research capacity in the public space and 
expanding the high tech workforce.
    The impact of the Bayh-Dole Act varies across industry sectors. 
Biotechnology, medical device, and pharmaceutical companies typically 
must have the ability to obtain exclusive licenses to intellectual 
property. In this sector, new products tend to have fewer components. 
They also must meet expensive, time-consuming, but necessary regulatory 
requirements to bring a product to market. By comparison, in the 
electronics sector, where the long-term value of specific intellectual 
property is variable, access to a wide portfolio of patents may be 
necessary to develop a product. Product realization tends to be more 
rapid. Similarly, different licensing strategies may apply in dealing 
with small companies, in particular start-ups, than with larger 
companies. And, in a number of circumstances, the competitive advantage 
afforded through exclusivity may be absolutely critical to justify the 
risk undertaken by a company in developing a product from a promising 
early-stage university technology, as it was in the case of Cardiomems. 
As technology transfer within U.S. universities has matured over the 
past twenty-five years, this need for different licensing strategies 
across and within industry sectors has become widely recognized. 
Fortunately, the authors of the Act anticipated this need and provided 
universities with the flexibility to pursue exclusive or non-exclusive 
licensing strategies.
    Challenges do exist in the relationship between American companies 
and universities. The primary cultural differences between them stem 
from their divergent missions and result from differences in their 
research agendas and positions on the dissemination of knowledge. In 
2004, the National Academies of Sciences' Government University 
Industry Research Roundtable served as the neutral convener for a 
collaborative effort of the National Council of University Research 
Administrators and the Industrial Research Institute that would lead to 
an open dialogue about these cultural differences. It was hoped that 
the conversation would lead to new approaches that could respect the 
missions of higher education and private industry and their respective 
contributions to innovation. In April 2006, this group published 
Guiding Principles for University-Industry Endeavors\12\ which examines 
the perspectives of universities and industries and identifies the 
common ground and the symbiotic relationship between American companies 
and universities. These Guiding Principles can serve as a roadmap for 
building collaboration and have the potential to foster stronger ties 
among those with common interests. However, an examination of this 
document reveals that the treatment of inventions that arise from 
federally-funded research at universities is not a factor in the 
relationship between industry and universities.
---------------------------------------------------------------------------
    \12\ National Council of University Research Administrators (NCURA) 
2006.
---------------------------------------------------------------------------
    The Subcommittee asks about the possible effects of the 
globalization of research.
    Universities in the United States have traditionally welcomed 
students from around the world. Faculty members have for many decades 
engaged in open collaborations in research and educational programs 
with colleagues in other countries. Universities have, therefore, had 
long experience in competing globally for talented students and faculty 
and competing globally in scholarship and intellectual output. For the 
last half of the twentieth century, the United States was undoubtedly 
the world's leader in science and technology. Even as European 
universities rebuilt following World War II, other nations' research 
institutions have emerged and grown along with R&D investment in those 
countries. Scientific and technological research as a global phenomenon 
has been studied intensively in recent years by a number of 
organizations including the National Academies of Sciences, The 
President's Council of Advisors on Science and Technology (PCAST), and 
the National Science Board.
    The Committee on Science, Engineering and Public Policy of the 
National Academies stated in 2006\13\, ``Many international comparisons 
put the United States as a leader in applying research and innovation 
to improve economic performance''. However, both this report and the 
PCAST report, Sustaining the Nation's Innovation Ecosystems: A Report 
on Information Technology Manufacturing and Competitiveness\14\, noted 
that other nations are catching up to U.S. leadership in information 
technology research and development. In its Science and Engineering 
Indicators 2006\15\, the National Science Board characterized the link 
between innovation and economic competitiveness by asserting that,
---------------------------------------------------------------------------
    \13\ Rising Above the Gathering Storm: Energizing and Employing 
America for a Brighter Future. National Academies Press, 2007.
    \14\ Sustaining the Nation's Innovation Ecosystems: A Report on 
Information Technology Manufacturing and Competitiveness, January 2004.
    \15\ Science and Engineering Indicators 2006, Volume 1, Chapter 4.

         Increasingly, the international competitiveness of a modern 
        economy is defined by its ability to generate, absorb, and 
        commercialize knowledge. Although it is no panacea, scientific 
        and technological knowledge has proven valuable in addressing 
        the challenges countries face in a variety of areas such as 
        sustainable development, economic growth, health care, and 
        agricultural production. Nations benefit from R&D performed 
        abroad, but domestic R&D performance is an important indicator 
        of a nation's innovative capacity and its prospects for future 
---------------------------------------------------------------------------
        growth, productivity, and S&T competitiveness.

    This report also found that the majority of research and 
development in the world is still performed by a small number of 
wealthy nations but that, as in many sectors, emerging economies are 
investing increased resources in research. The National Science Board 
identified the following factors in assessing a country's R&D 
performance and innovation capabilities:

          The culture of cooperation between R&D performing 
        sectors

          The ability of a country to train and retain its 
        highly skilled scientists and engineers

          Strong intellectual property laws and a strong patent 
        system

          Governmental, legal, and cultural restrictions

          The presence of a sophisticated, demanding, and 
        wealthy domestic market for innovation

          The quality of research institutions (universities 
        and government facilities) as quantitatively assessed by 
        objective measures of research output and peer rankings

          Research infrastructure including facilities and 
        instrumentation.

    The Bayh-Dole Act is a key element in several of these factors. The 
Act is part of strong protections for intellectual property that arises 
from federally-funded research and helps ensure that entrepreneurs can 
find the sophisticated, wealthy, demanding investors and, ultimately, 
markets for new technologies. Bayh-Dole also contributes to the 
strength and quality of U.S. research universities. In 2003, PCAST 
affirmed the success of the Bayh-Dole Act and noted that other nations 
are attempting to replicate this model. As Senator Birch Bayh commented 
in a speech last year to the Licensing Executives Society, ``It is no 
accident the rest of the world is copying the Bayh-Dole model. The 
European Union, Japan, China, India and many others hope to tap their 
own cutting edge university research to win the future economic race. 
We in the United States cannot afford to rest on our laurels.'' For 
example, Japan, clearly recognized as a world economic leader with a 
focus on technology markets, began implementing laws in the 1990's that 
contained provisions similar to the U.S. Bayh-Dole Act. Other countries 
throughout the world now recognize the importance of protecting 
intellectual property, having laws that allow their universities to 
assert rights in employee created intellectual property, and of 
benchmarking the system that resulted from the passage of Bayh-Dole. As 
Senator Bayh further noted, ``When India decided that it wanted to 
start being a creator of technology and not an exporter of scientists 
to the West, it began protecting intellectual property.''
    Finally, the Subcommittee has asked what changes might be 
appropriate as we look forward to the next 25 years of Bayh-Dole.
    The President's Council of Advisors on Science and Technology 
undertook a year-long study of the results of the federal investment in 
research and development. Their Report on Technology Transfer of 
Federally Funded R&D: Findings and Proposed Actions\16\ was submitted 
to the Office of Science and Technology Policy on May 13, 2003. I 
commend this report, which offers a thorough analysis of technology 
transfer by a panel representing both higher education and industry, to 
the Subcommittee and have included it as an appendix to this written 
testimony. While PCAST made a number of recommendations to the 
Department of Commerce and others regarding education and 
implementation, their conclusion is:
---------------------------------------------------------------------------
    \16\ Report on Technology Transfer of Federally Funded R&D: 
Findings and Proposed Actions.

         ``Existing technology transfer legislation works and should 
---------------------------------------------------------------------------
        not be altered.''

    By almost any objective standard, the Bayh-Dole Act has been an 
exceptional success. More compelling than the 4,932 new licenses 
signed, the 527 new products introduced into the market or the 628 new 
companies formed in 2005 according to the AUTM's U.S. Licensing Survey 
are the individual technology realization stories captured in their The 
Better World Report first published last year. This report takes an in-
depth look at twenty-five innovations derived from academic research 
that has had a dramatic impact on the world. Whether it is the story of 
Taxol and the more than two million women worldwide who have taken the 
drug to fight ovarian and breast cancer, the SpeechEasy device that 
has helped thousands of individuals affected with stuttering, GoogleTM 
and its more than 10,000 employees, or countless others, including the 
Cardiomems story, the success of academic technology realization is 
clear. This is a significant improvement from when intellectual 
property resulting from federally funded research was available to all 
non-exclusively and nearly 30,000 patents laid dormant.
    Over twenty-five years ago, Senator Birch Bayh opened the hearings 
on the legislation with the following statement:

         ``The United States has built its prosperity on innovation. 
        That tradition of unsurpassed innovation remains our heritage, 
        but without continued effort it is not necessarily our destiny. 
        There is no engraving in stone from on high that we shall 
        remain No. 1 in international economic competition. In a number 
        of industries we are no longer even No. 2. New incentives and 
        policies are needed to reverse this trend.''

    Today, U.S. industry continues to face competitive pressures 
globally. The need for basic research as the foundation of innovation 
still exists. And, while, cultural differences sometimes strain 
collaboration between industry and academia, the Bayh-Dole Act has 
helped foster a new and highly successful era of collaboration by 
establishing a uniform federal invention policy, encouraging 
universities to develop relationships with industry through 
commercialization of inventions, and establishing preference for 
manufacturing of products in the United States.
    Based on the objective, numerical successes of the Act as well as 
my personal experiences with Cardiomems, I feel strongly we should not 
alter in any significant way the legislation that has been so 
successful, and that the rest of the world is using as the model of 
innovation.
    Thank you again for this opportunity to comment on my experiences 
and the topic of Bayh-Dole. I am pleased to respond to any requests the 
Subcommittee may have for additional information regarding my 
testimony.
    Attachment: Technology Transfer of Federally-Funded R&D, PCAST 
2003.




                      Biography for Mark G. Allen

I. EARNED DEGREES

Ph.D., 1989, Massachusetts Institute of Technology, Microelectronics

S.M., 1986, Massachusetts Institute of Technology, Chemical Engineering

B.S.E.E., 1988, University of Pennsylvania, Electrical Engineering

B.S.Ch.E., 1984, University of Pennsylvania, Chemical Engineering

B.A., 1984, University of Pennsylvania, Chemistry

II. EMPLOYMENT

Regents' Professor, Georgia Institute of Technology--7/05-present

Professor (with tenure), Georgia Institute of Technology--7/99-present

Associate Professor (with tenure), Georgia Institute of Technology--7/
94-6/99

Visiting Professor, Swiss Federal Institute of Technology--6/00-8/00

Visiting Professor, Swiss Federal Institute of Technology--6/98-9/98

Visiting Professor, Swiss Federal Institute of Technology--6/94-9/94

Postdoctoral Associate, Massachusetts Institute of Technology--5/89-9/
89

III. RESEARCH INTERESTS

    Professor Allen's research interests focus on the development and 
understanding of fabrication technologies for microelectromechanical 
and nanoelectromechanical systems.

IV. MOST RELEVANT PUBLICATIONS (SELECTED FROM APPROXIMATELY 200)

 1.  Frazier, A.B., Olson, C.S., Turner, S.P., and Allen, M.G., 
``Characterization of Graphite-Filled Polyimide Thin Films Using 
Micromachining Techniques,'' International Journal of Microcircuits and 
Electronic Packaging, vol. 17, no. 1, pp. 37-49, 1994.

 2.  Frazier, A.B., Ahn, C.H., and Allen, M.G., ``Development of 
Micromachined Devices using Polyimide-Based Processes,'' Sensors and 
Actuators A (Physical), vol. A45, no. 1, pp. 47-55, 1994.

 3.  Lagorce, L.K. and Allen, M.G., ``Magnetic and Mechanical 
Properties of Micromachined Strontium Ferrite/Polyimide Composites,'' 
IEEE/ASME Journal of Microelectromechanical Systems, vol. 6, no. 4, pp. 
307-312, 1997.

 4.  Frazier, A.B. and Allen, M.G., ``Uses of Electroplated Aluminum 
for the Development of Microstructures and Micromachining Processes,'' 
IEEE/ASME Journal of Microelectromechanical Systems, vol. 6, no. 2, pp. 
91-98, 1997.

 5.  Taylor, W.P., Brand, O., and Allen, M.G., ``Fully Integrated 
Magnetically Actuated Micromachined Relays,'' IEEE/ASME Journal of 
Microelectromechanical Systems, vol. 7, no. 2, pp. 181-191, 1998.

 6.  Seriburi, P.; Kercher, D.; Allen, M.G., ``An Experimental Study of 
Microfabricated Spark Gaps: Wear and Erosion Characteristics,'' J. 
Micromechanics Microengineering, vol. 11, no. 3, pp. 165-74 (2001).

 7.  Kercher, D.S.; Lee, J.B.; Brand, O.; Allen, M.G.; Glezer, A., 
``Microjet cooling devices for thermal management of electronics'' IEEE 
Transactions on Components and Packaging Technologies, vol. 26, no. 2, 
June 2003, pp. 359-66.

 8.  Chang, S.P.; Allen, M.G., ``Capacitive pressure sensors with 
stainless steel diaphragm and substrate,'' Journal of Micromechanics 
and Microengineering, vol. 14, no. 4, April 2004, pp. 612-18.

 9.  Park, J.W.; Cros, F.; Allen, M.G., ``Planar spiral inductors with 
multi-layer micrometer-scale laminated cores for compact-packaging 
power converter applications,'' IEEE Transactions on Magnetics, vol. 
40, no. 4, pt. 2, July 2004, pp. 2020-2.

10.  DiBiaso, H.H.; English, B.A.; Allen, M.G., ``Solid-phase 
conductive fuels for chemical microactuators,'' Sensors and Actuators A 
(Physical), vol. A111, no. 2-3, March 2004, pp. 260-6.

11.  Fonseca, M.A.; English, J.M.; von Arx, M.; Allen, M.G., ``High 
temperature characterization of ceramic pressure sensors,'' 11th 
International Conference on Solid-State Sensors and Actuators, Digest 
of Technical Papers, pp. 486-9, vol. 1 (2001).

12.  Marquordt, C.; Allen, M.G., ``Fabrication of micromechanical 
structures of titania and titanium with electrophoretic deposition,'' 
11th International Conference on Solid-State Sensors and Actuators, 
Digest of Technical Papers, pp. 616-19, vol. 1 (2001).

13.  Yoon, Y.K., Allen, M.G., ``A Pt heater/sensor microarray for 
distributed fluidic cooling assessment,'' Micro-Electro-Mechanical 
Systems (MEMS). 2001 ASME International Mechanical Engineering Congress 
and Exposition, 2001, pp. 669-75.

14.  Choi, Y.; Kim, K.; Allen, M.G., ``A magnetically actuated, 
electrostatically clamped high current MEMS switch,'' Micro-Electro-
Mechanical Systems (MEMS). 2001 ASME International Mechanical 
Engineering Congress and Exposition, 2001, pp. 83-7.

15.  English, B.A., Allen, M.G., and DiBasio, H.H., ``Microcombustors 
Based on Controllable Solid Fuel Elements,'' Proc. American Society of 
Mechanical Engineers Winter Annual Meeting, vol. 5, pp. 725-733 (2003).

16.  Yanzhu Zhao; English, B.A.; Yoonsu Choi; DiBiaso, H.; Guang, Yuan; 
Allen, M.G., ``Polymeric microcombustors for solid-phase conductive 
fuels,'' 17th IEEE International Conference on Micro Electro Mechanical 
Systems, Technical Digest, pp. 498-501 (2004).

V. HONORS AND AWARDS

 1.  Member, Tau Beta Pi (Engineering Honor Society), 1984

 2.  Member, Phi Lambda Upsilon (Chemistry Honor Society), 1984

 3.  Arthur K. Doolittle Award, American Chemical Society Division of 
Polymeric Materials: Science and Engineering, 1988

 4.  Georgia Tech Packaging Research Center, Research Faculty Award, 
1996

 5.  Fellow, College of Relay Engineers, National Association of Relay 
Manufacturers, 1997

 6.  Georgia Tech College of Engineering Faculty Research Award, 2000

 7.  J.M. Pettit Professorship Georgia Institute of Technology, July 
2001 (initial five-year term); renewed indefinitely 2005.

 8.  School of Electrical and Computer Engineering Sustained Program 
Development Award, 2002

 9.  Regents' Professorship, University System of Georgia, 2005.

10.  Outstanding Leadership Award for Development of Graduate Research 
Assistants (for the period 2001-2003), Georgia Institute of Technology, 
2005.

                               Discussion

    Chairman Wu. I thank all of the witnesses for your very 
illuminating testimony, and now, we will turn to questions. And 
at this point, we will open for our first round of questions, 
and the Chair recognizes himself for five minutes.
    Mr. Pradhan, you believe that Bayh-Dole has stimulated 
technology transfer, and also, done a reasonable job of 
encouraging productive university-industry partnerships. It 
appears from our panel of witnesses that this view is not 
universally shared, and I would like to give you and the other 
witnesses an opportunity to discuss this issue in this forum, 
and then, to drill down, and get a little bit more granularity 
on that discussion, about where the problems exist, and where 
they do not, whether it applies uniformly across different 
fields.
    And Mr. Pradhan, let me turn it over to you, and then, we 
will do this first four minutes in a discussion format.
    Mr. Pradhan. Mr. Chairman, thank you. I do believe that 
there are more collaborations, effective collaborations that 
are occurring between universities and industry at this 
juncture than there have been before. My personal experiences 
in this have been very positive. At every institution that I 
have been at, the amount of industry collaborations has 
progressively increased.
    I have been at Oregon Health and Science University for 
three years, and even in the three years that I have been 
there, the number of collaborations has doubled, and the amount 
of research funding changing hands has tripled. And this is 
across all sectors. We have effectively partnered with 
companies in the IT industry. We continue to effectively 
partner with companies for drug development, for clinical 
trials, and for basic research.
    I think one of the fundamental aspects that one has to keep 
in mind are the different cultures that each industry brings to 
the table, and the culture of collaboration at a university. 
Intellectual property itself is not a stumbling block, in my 
opinion. Access to intellectual property is determined by the 
nature of the project. It is determined by what outcomes are 
being sought, and it is also determined by what relative 
contributions are made prior to the research project actually 
coming together between a company and a university.
    So, I think the fundamental aspect of being pragmatic, and 
approaching this in a collaborative way, tends to alleviate a 
number of the problems that we have heard. It is true that you 
can't rely on patents in the IT industry to generate royalties. 
In fact, if you take a look at a printer or at a computer, 
there is upwards of 500 patented technologies that go into 
that. The price pressure for those in the marketplace is to 
keep the prices down, and----
    Chairman Wu. Arun, I am going to ask you to summarize your 
comments. I will extend the same courtesy to other members who 
are here. We will permit panelists to finish comments on the 
same question asked, but I am going to run over my first five 
minutes, but the prerogative of the chair, we will stay here as 
long as we need to to run through all of my questions in cycle.
    Mr. Pradhan. I will be brief. In summation, I think the 
problem are not insurmountable.
    Chairman Wu. Dr. Butts and Mr. Johnson, your comments, 
perhaps, and then, perhaps Dr. Lemley, you would like to clean 
up on this, and Dr. Allen, I don't mean to exclude you, if you 
have something you need after that also, please.
    Dr. Butts. Yes, just a couple of thoughts to share. The 
growth in the number of partnerships is really a general 
phenomenon. In fact, as companies have moved from the old model 
of having the big, central research organization, to 
recognizing that it is more productive to use external 
resources, I think in general, the number of collaborations 
happening is increasing. So, not just between companies in the 
U.S. and U.S. universities, but around the world, in other 
sorts of collaborations. So, I don't think that is necessarily 
the best metric for the state of the relationship.
    But I would also say that in negotiations, my experience 
has been that universities and companies are both trying to do 
the right thing for their institutions, and so, what they are 
trying to do is live by their expectations, or in some cases, 
of the universities' patent policies, that dictate how 
intellectual property should be handled.
    And where we see the difficulty, often, is in the timeline. 
So, the difference in the university mission and the sense of 
time, versus a corporate mission, and the sense of time. So, 
for instance, within Dow, our projects are all on a project 
timeline, with milestones and decision points, and when we 
spend five months negotiating an agreement, it may be that the 
research project, when it finally gets started, delivers its 
results too late to be useful. So, to me, it is a very 
important issue around how long it takes to reach agreement, 
even if we eventually get there.
    Chairman Wu. Thank you. Mr. Johnson, your comments.
    Mr. Johnson. I have three of them. Well, one of the things 
that is, I think, apparent so far is that the IT industry is 
really different than some of the others that we have been 
talking about. In fact, you know, if you look at what we do as 
a practice, we actually cross-license even our own inventions 
to our competitors, otherwise, we don't have a product. So, I 
think in any kind of situation where you are dealing with a 
certain vertical industry, the universities, I think, need to 
take into account the fact that that is, you know, our 
expectation. Our time to market is three to six months. Our 
cost per unit keeps doing down, so to be competitive, we really 
need to do that.
    I would also say that there is a difference between 
universities. I mean, I manage the entire strategic university 
portfolio across Hewlett-Packard, so I have an insight into a 
broad range of universities here and overseas. I think it 
differs between universities even in the U.S. We have 
universities where we are more able to negotiate these patents 
more quickly, or licenses, and ones that don't. So, I think to 
some degree, it is a function of the leadership and the 
strategic thinking of the university.
    I would also comment that I don't think industry is 
blameless in this. There are some companies that haven't 
developed the right strategy, and don't understand the 
difference in cultures. If you don't figure out what the 
cultural differences are, you are not going to have a very good 
relationship, and you are not going to work quickly to get 
something done.
    And I would say, from an IT industry perspective, the fact 
that we are a global, clearly a global activity, we need to go 
places where the technology, the localization, so we are 
constantly looking for opportunities to go somewhere else that 
we can get the work done as quickly as possible.
    From a U.S. perspective, I don't think this is necessarily 
bad, but if we end up going only outside the U.S., it would 
clearly be. So, I think the issue of the global industries, and 
Dow, I think, is another example, we go where the information 
is, where the talented people are, and the ability to get the 
work done more rapidly.
    So, I think all of those are factors that makes the IT 
industry somewhat different.
    Chairman Wu. Thank you for your comments, Mr. Johnson, and 
I think that something that you said triggered in my mind that 
perhaps one of the ignored factors in competitiveness for the 
long term is our visa policy, and we will hold hearings in the 
Science Committee on that issue later.
    Dr. Lemley or Dr. Allen, any comments on this, and then, we 
will turn it to Dr. Gingrey.
    Dr. Lemley. Well, so, I think that the most successful 
examples of university-private collaboration have been in what 
Mr. Johnson called the home run patents, the very successful 
new inventions that can then form the basis of a product that 
is sold in the marketplace. Those are the ones where the patent 
needs to be turned into a product that is commercialized. They 
tend to be in the biomedical space, though there are exceptions 
to that.
    And the problem comes about when universities take that 
lucrative licensing model for home run patents, and they try to 
apply it to the patent that is one component out of 500 in a 
product. There, not only are you having to deal with the other 
patents, but you have also got the problem, you have less need 
for this commercialization. You are not building a product 
around this patent. It is one piece in a much larger puzzle.
    Dr. Allen. So, one thing that I heard from all of our 
panelists was that perhaps it is not so much changes in the 
Bayh-Dole legislation itself that is important, as it is 
education of some of the universities and technology transfer 
offices to these differences.
    And we do have, within the current legislation, this 
flexibility available to us to do both kinds, the home run kind 
of licensing and the nonexclusive licensing to all comers. I, 
personally, as a researcher, have been involved in both, where 
appropriate, and I think that would be a good model, perhaps, 
for us to consider.
    Chairman Wu. We will return to this topic, but my time has 
expired long ago. Dr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you. And it really is a 
segue into my question, and I am going to address it first to 
Dr. Lemley, because he commented on it first.
    You were talking in your testimony, Dr. Lemley, and you 
mentioned biotech and pharmaceutical companies benefit from 
patents due to the high R&D costs, and the lengthy process of 
commercialization. And I want to know, and we will start with 
you, and then, the other witnesses may comment, are you 
suggesting that Congress might consider creating product-
specific or industry-specific patent regulations that are 
different? And we will start with you, Doctor.
    Dr. Lemley. I think that is a possibility, though I would 
look at it as a last resort, in part, because it is very 
difficult to draw lines that cleanly divide technologies, so 
there are all sorts of examples. One that comes to mind 
immediately is bioinformatics, which is this interesting 
crossover of biotechnology and computer software in the service 
of trying to kind of mine and rationalize biotechnology data.
    I do think it is a problem. I think it is a problem, the 
industry specificity, that we ought to try to solve at the 
university level. It is something that we could solve at the 
government level, if need be, though my preference would be, 
rather than industry-specific rules and legislation, having the 
PTO or some other agency with enough authority to make a case 
by case decision, that here is a circumstance in which we want 
to march in and require nonexclusive licensing.
    Mr. Gingrey. I think, maybe Dr. Allen, you had mentioned 
something in your last comment, if you would like to pick up on 
what Dr. Lemley just said.
    Dr. Allen. That is right, and I do agree that different 
industries, as I mentioned, do need different treatments, so to 
speak, but I really don't believe that treatment at the level 
of legislation is required. I think it is more, perhaps, in the 
regulation and implementation or interpretation of the 
legislation where that might be most useful.
    Otherwise, we will wind up with situations where companies 
are struggling to define their products in one area or another, 
in order to receive favorable treatment, perhaps, under certain 
differentiating patent rules or what have you.
    Mr. Gingrey. Dr. Pradhan, and then, we will go to Dr. Butts 
and Mr. Johnson.
    Mr. Pradhan. I agree with Drs. Lemley and Allen. It is very 
hard to legislate patent policy by industry sector. In fact, 
the example that Dr. Allen used, where the original invention 
occurred for smart turbine engines is now being applied in 
healthcare, is very illustrative of how widely some university 
inventions can be applied, and from the university perspective, 
we actually cross a lot of industry sectors with any particular 
invention.
    Dr. Butts. I am concerned that a legislative remedy that 
involved defining industries or technologies would only 
complicate the situation, and I would prefer to see more 
flexibility, so that individual companies and universities felt 
that they were freer to negotiate and agreement that made sense 
for the particular circumstances of the project.
    Mr. Johnson. I would agree also with Susan's point on 
trying to figure out what industry specifically to add up and 
put in a certain column. I would, however, say that our typical 
interaction with a university, where we walk in to try to 
sponsor research, we are looking to find some of the best 
people in the world which are there. They have already done the 
research, that is why we know that they are there. We come in, 
we say we want to sponsor you with, say, $100,000, and the 
first comment out of the other side is well, it has got to be 
an exclusive license, and we own all the rights.
    This idea that our major negotiating position is to have a 
nonexclusive, royalty-free license, especially when we are 
funding the research, we think that is reasonable. That is a 
win-win. So, even though Bayh-Dole provides for the possibility 
of both, I will tell you that the conversation, 90 percent of 
the time, does not go there. And that is what often takes the 
six months, nine months, a year, year and a half, 18 months, 
for us to get done. So, even though the flexibility is there, 
that isn't where the negotiation starts.
    Chairman Wu. Thank you, Dr. Gingrey. Let me follow up on 
that before I turn to a related topic.
    Mr. Johnson, you said that when you come in with 
potentially $100,000 on the table for sponsored research, 
frequently the goal is to have a nonexclusive, royalty-free 
license from any resulting technology. I would like to hear 
from you, and perhaps some of the other folks who are familiar 
with university policy, what prevents that particular deal from 
working quickly, when there are potentially other revenue 
opportunities from that particular sponsored research?
    Mr. Johnson. I think it starts out from the premise that 
the blockbuster patent or the pharmaceutical way of doing 
business is the best way to do business. I think there is an 
expectation there will be more outcome or wealth for the 
university if that is the approach that is taken. I also think, 
based on our experience, that when we negotiate these things, 
it often ends up with an individual researcher, or an HP 
attorney, and the technology transfer office in the university, 
that no one has thought about the broader implications, both 
strategic and business, that need to be thought about as we are 
discussing this. So, our remedy, that we have worked on in 
California, which has actually moved in the right direction, is 
to move the whole conversation upstream, to understand why is a 
company coming to this university. Yes, it is about the 
technology, but typically, it is about a long-term strategic 
partnership.
    At the Provost level, this conversation goes great. At the 
legal or lawyer level, it goes downhill quickly, and so, our 
remedy for that is really to get people engaged at a much 
higher level in understanding why the two organizations are 
coming together. That is often much more effective, and is the 
only effective way to get this to happen more quickly, so it is 
almost a conditioned response. Here is some money, oh, I want 
an exclusive license. You don't get the nonexclusive, royalty-
free license, which is effectively what the IT industry does 
among itself. This isn't something new. This is how we build 
our industry. IBM, HP, Microsoft, we all cross-license.
    Chairman Wu. Thank you very much, Mr. Johnson, and we will 
let other folks comment on this, if folks have a comment, in 
one moment. Mr. Johnson, and this is related to the question of 
what works and what doesn't. In your written testimony, you 
list Purdue, Georgia Tech, University of California, and 
Stanford as institutions that perhaps do a better job of 
striking a balance to promote technology transfer. What is 
different in the practices among what you would characterize as 
successful institutions, versus some others that you negotiate 
with? And Dr. Allen, you referred to, we don't need 
legislation, we need better behavior, so let us circle in on 
what that, what the behavior is, and what the mechanisms might 
be for any potential improvements.
    Mr. Johnson. So, I would say, generally speaking, that the 
licensing offices at those universities are staffed with some 
of the best people that we know in the university community. 
They are able to, there is a philosophy of staffing at that 
level, meaning very high level kind of capability. I would also 
say that as I mentioned before, that there is an understanding 
of the strategic partnership in all of those universities, all 
the way up to the President level, of what combining with HP 
means from their perspective. I would also say that we have 
been engaged in that process in all of those universities for 
maybe 10 or 15 years, so long-term strategic partnerships have 
been developed.
    And in the case of Berkeley, recently, we have worked on 
this very long activity of looking at what are the strategic 
reasons that we are engaged with Berkeley, and then, we filter 
that all the way down into the licensing office. So, again, it 
is not a one decision, one license negotiation. It is done at a 
very high strategic level. And it seems that all of those 
universities more or less operate under those circumstances.
    Chairman Wu. Thank you. Arun, I believe you had some 
comment on this, or the prior exchange.
    Mr. Pradhan. This, as well as the prior exchange. I tend to 
agree with Mr. Johnson, with respect to establishing strategic 
alliances between universities and industry. However, taking 
the IT model and drilling down a little further, as you 
suggested, most universities would be willing to grant 
nonexclusive licenses, but oftentimes, where the communication 
breakdown occurs is that even in the cross-licensing realm, for 
example, universities need to be able to license other 
practitioners in the IT industry, if they are to derive 
revenue.
    And so, there is an issue with respect to sublicensing 
rights that often comes up. A nonexclusive, irrevocable, 
royalty-free license that is sublicensable does nothing for an 
academic institution at that point. And it is hard to comment 
on the aspects of any one particular negotiation, but these are 
just some of the principles that we try to keep in mind as we 
move forward. Where if we understand what the needs are, and 
the company understands what the institution needs are, then we 
can often arrive at an amicable resolution.
    Chairman Wu. I want to let the other three witnesses 
comment on this particular exchange, and for the next five 
minutes that I have, Dr. Allen, you mentioned that statutory 
approaches may not be appropriate, but that perhaps a 
regulatory approach or something more flexible might work. What 
I have been racking my brain about since you made that comment 
is that we do not have an SEC, we do not have an FDA. We might 
not want to have any of those things in this particular arena, 
but I will save that for the next round of questions.
    Do any of the other witnesses have comments on what Mr. 
Johnson and Mr. Pradhan have commented on?
    Dr. Butts. I would like to comment on the options that are 
on the table in licensing, and actually, contrary to Wayne's 
experience, typically, when we are working with a university, 
what they are comfortable offering us is an option to negotiate 
a license to foreground inventions, with no certainty that we 
will be able to come to terms or no, really, indication of what 
we might have to pay to get the license. And for us, that is 
really the biggest problem. We would be happy often to have the 
exclusive, but it is a difficult decision for our management to 
justify, to go into a very open-ended situation, especially if 
we have contributed more than just money to fund the project. 
If we have provided background research results, we may be 
providing noncommercial samples or prototypes, plus input from 
our researchers. So, in that case, we have made a pretty 
significant investment, and having an open-ended situation is 
really very difficult for us to live with.
    Chairman Wu. Well, what Mr. Johnson said earlier makes me 
think that this course of dealing, a long course of dealing 
between a private entity and a university, helps establish some 
parameters, and it makes me think that, perhaps, if there were, 
shall we say, a range of reason, that if you were getting a 
license to license, that if one had a range of reason set of 
expectations, I mean, that is one of the problems, that there 
might not be that.
    Do any of the other witnesses have a comment on this, 
before I turn to the next set of--please proceed.
    Dr. Lemley. Just briefly, I think part of the problem is 
one of bureaucratic structure and incentives. If you are 
dealing with an office of technology licensing that is judged 
at the university by how much money it generates in licensing 
revenue at the end of the day, their incentives are different, 
and not necessarily aligned with the incentives of the broader 
university. And one of the things, I think, that distinguishes 
Mr. Johnson's more enlightened or easier to deal with 
universities, and I am delighted to see mine on the list, is 
that the relationship is a broader one. It is not just with a 
discrete office of technology licensing. It is with a broader 
group. It is with individual departments, and the office of 
technology licensing has an understanding that maximizing 
revenue is one goal, but it is not the only goal.
    Chairman Wu. And Dr. Allen, feel no compulsion to comment, 
but if you would like.
    Dr. Allen. So, very briefly, I would just point out that of 
the vast majority of industry contracts that I have in my lab 
at Georgia Tech, they are either donations from industry, who 
have given money for support of students or what have you 
without any concern for intellectual property issues, or they 
are exactly the type of contract that are being discussed 
where, in consideration for the sponsorship of the research 
contract, a nonexclusive, royalty-free license is given for the 
foreground intellectual property.
    So, I know it is possible.
    Chairman Wu. Thank you. Dr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you, and I hope my 
question is not the same question. I think when you got into 
your second five minute round, you may have touched on what I 
wanted to give Dr. Allen an opportunity to discuss. Georgia 
Tech is one of those that were mentioned, the five or six 
research universities that industry, whether it is Dow Chemical 
or Hewlett-Packard, has been fond of the relationship, if you 
will. I want to specifically ask Dr. Allen, because you 
mentioned some with Georgia Tech that moved a number of 
innovations from the lab into real commercial products.
    What do you think are the characteristics of Georgia Tech 
that allow it to be so effective at this process?
    Dr. Allen. I think that----
    Mr. Gingrey. And like universities?
    Dr. Allen. Yes, of course. I believe that one of the things 
that Georgia Tech has always had a history of is a long 
relationship with industry, a relationship that has been 
focused on being able to do the applied end of engineering 
research in terms of a broad spectrum, so we certainly have our 
basic science departments, but we span a broad spectrum all the 
way to applied engineering, and even to work that is done not 
with students, of course, but work for the government, which is 
kept classified.
    As a result, I think that there has been a value, placed on 
the faculty, or the faculty have felt that there is value in 
commercialization, so in, and it is certainly not a universal 
sentiment. Some faculty feel that commercialization is 
something that should be left to others. I believe at the 
universities that are cited by Mr. Johnson, there is a feeling 
that commercialization is part and parcel of what at least the 
engineering faculty are supposed to be doing. In some sense, it 
is a final validation of the engineering research that we are 
doing, if at the end of it, someone is willing to pay for using 
that particular product.
    I also think that one of the things that we don't do at 
Georgia Tech is that we don't look to the value of licensing 
revenue as adding to a huge percentage of the industry income. 
And I hesitate to read these numbers into the Congressional 
Record, because I am doing them from memory, but I believe that 
annually, the Georgia Tech does about $80 million of industry 
research, which represents about 21 percent of Georgia Tech's 
total research budget, and of that, about 1 percent is revenue 
from licensing.
    And so, if you look at these numbers, and say well, I am 
going to double the licensing revenue, perhaps, and cut the 
industry contracts by a factor of two, I don't think that 
anyone at Georgia Tech would be very happy with that. So, I 
think that that is another piece of what we do, is to make sure 
that the technology licensing is serving the industry contract 
piece, rather than the other way around.
    Mr. Gingrey. Any other comments from witnesses? Yes, Dr. 
Butts.
    Dr. Butts. I would like to make a comment. I think what we 
are seeing at an institution like Georgia Tech is very 
enlightened leadership around the whole process of working with 
industry, and the recognition that quickly coming to an 
agreement is really beneficial to both parties, and that both 
benefit more by doing that than by either one holding out to 
try to get the best possible deal. So, I think institutions 
where there is a recognition that this is a good thing, to have 
these research projects go forward, and have these 
collaborations occur, and all the benefits that come from 
those, including opportunities for students and things, is 
worth not worrying about, perhaps, losing a little bit on the 
financial side.
    Mr. Gingrey. Mr. Chairman, thank you, and I will yield 
back, and look forward to the next round.
    Chairman Wu. Thank you very much. Dr. Allen, you refer to 
perhaps regulatory oversight, and Dr. Lemley, you refer to, 
essentially, important Congressional oversight function in 
making Bayh-Dole and technology transfer in general work a 
little bit better. What kind of oversight do you all have in 
mind, and I would like to have the other witnesses comment on 
this, to the extent that you all have some thoughts on this 
also. Dr. Lemley or Dr. Allen.
    Dr. Allen. I think oversight can be performed at many 
levels, and one of the ones that comes to mind immediately to 
me is whether or not, and I almost hesitate to use this term, 
the trade association, if you will, or perhaps, the Association 
of University Technology Managers, might not be a place where 
there is peer pressure based oversight to make sure that these 
sorts of favorable intellectual property provisions that we 
have talked about, are implemented in the appropriate places. I 
think that that is certainly a place to start, rather than, 
perhaps, immediately leaping to Congressional oversight.
    There is a motion to do this. My understanding, we heard 
mentioned earlier the Nine Points to Consider of the AUTM, and 
perhaps, that is a place that we can start, and build upon 
within the university community.
    Dr. Lemley. Mr. Chairman, what I was referring to in my 
testimony is something that is already in the Bayh-Dole Act, 
Section 203 of the Patent Code, which leaves open the 
possibility that federally funded inventions that are patented 
and licensed under Bayh-Dole, are subject to what are called 
march-in rights, in circumstances in which the agency doing the 
funding determines that the invention is either not being 
licensed appropriately, or has been licensed exclusively to 
someone who is not, in turn, commercializing it. That 
provision, I think, gives the government, and the agencies who 
are most directly responsible for funding the invention, a 
decent amount of discretion and power to solve problems as they 
arise, at least in theory.
    It has, in practice, never been used. Perhaps that is 
because we have never run into one of these situations, but I 
think it may also be that there is a bit of unnecessary 
timidity on the part of the agencies to be the first one to 
actually exercise this right.
    Chairman Wu. Well, Dr. Lemley, since you are speaking, let 
me invite you to continue. Stanford did some interesting 
nonexclusive licensing, starting, I believe, in the late '70s 
and maybe early '80s. The shape of our biotechnology industry 
would be very, very different had those licenses been 
exclusive, rather than nonexclusive. To the extent that you are 
familiar with the history, can you tell us how Stanford, or the 
tech licensing folks at Stanford, went about the university's 
decision to make those nonexclusive, and therefore, broadly 
practicable licenses?
    Dr. Lemley. As I understand it, and this is secondhand, my 
understanding, in particular, of the licensing of the licensing 
of the Cohen-Boyer patents on DNA, which were the fundamental 
California and Stanford patents, was that they were 
nonexclusive, and available to all comers, in significant part 
because the National Institutes of Health required that they 
be, or at least, strongly encouraged it. This was in the time 
prior to Bayh-Dole, so there weren't rules with respect to 
university patenting that were across the board. Individual 
government departments set up their own rules, and the National 
Institutes of Health strongly encouraged nonexclusive 
licensing.
    I don't know, I wasn't around, and I haven't talked to the 
people at Stanford at the time, whether that is something they 
would have done anyway in the absence of that government 
encouragement.
    Chairman Wu. I am afraid I am showing that I am getting 
long in the tooth. I was a student hanging around during those 
days, but of course, I didn't know any of that was going on. 
Actually, there were some professors, saying that they had 
something interesting, but they didn't think that there would 
ever be any commercial value to it.
    Following up on that, if we do have, in some respects, a 
divide between some of the life sciences and some of the 
chemical compounds, and let us just say, call it the world of 
electronics and software, where there is a lot of cross-
licensing, and cycle times are a lot higher, would a parallel 
approach, where individual agencies that are grant-giving 
agencies, have some more leeway, and have some more influence 
over setting up some guidelines for tech licensing, would that 
be helpful to some of the problems that Dr. Butts and Mr. 
Johnson, you all have experienced from, you know, sitting from 
your perspective. And Arun, we will get you your chance to 
comment on that, too.
    Dr. Butts. Actually, our problems don't really occur when 
we try to license inventions that came from federal funding. I 
think we understand how that process occurs. It is more when we 
want to invest in the research, and make sure that we 
understand what rights we will have to the resulting 
intellectual property. And I think it would be hard, there, for 
the federal agencies to have very much constructive impact.
    In fact, my belief is that Bayh-Dole really shouldn't apply 
in cases where the company is funding that research, and I 
think what would be helpful is a clarification that that really 
was not the intention of Congress that Bayh-Dole would apply to 
every research project going on in the university, regardless 
of the source of funding.
    Chairman Wu. We will come back to that in the next round. 
Mr. Johnson or----
    Mr. Johnson. So, I have--well, I have a different industry, 
but I would say that the whole issue around the understanding 
of this as an issue needs to get raised. You know, we have done 
work for three or four years at GUIRR, under the National 
Academies. I think there needs to be a National Academy level 
discussion about what the needs of these two industries are, 
and that people would better understand what good approaches 
would end up with, when we would go about this.
    I just think the conversation ends up at the wrong level. 
Our work in the Bay Area, we found there were a lot of belief 
systems that operate below the radar screen, that basically 
make people feel that this is a money-maker, and in fact, when 
you look at our industry, it is not. So, it is a lose-lose. So, 
I think a discussion needs to go on at some place. Maybe the 
National Academies would be the right place, but some convening 
power, where everybody would really understand what the issues 
are here. It is really a lack of understanding.
    Chairman Wu. We are starting that conversation today, but 
you are right. We may need to take it somewhere else. Mr. 
Pradhan, if you have any comments, and then, we will flip it 
back over to Dr. Gingrey.
    Mr. Pradhan. Just a very brief comment that, as Dr. Butts 
suggested, that the role of federal agencies is not necessarily 
to determine what happens to inventions from industry-
university collaborations. That actually falls on different 
shoulders, and has to do with tax laws and what is defined as 
unrelated business income tax. And so, there are multiple 
issues, as always, that come into a decision-making process, 
and it is not just one regulation or one set of policies or the 
other.
    Chairman Wu. Thank you. Dr. Gingrey.
    Mr. Gingrey. I was discussing with my staff, earlier today, 
in regard to preparation for this hearing, and I asked them a 
question, and I think that they satisfactorily answered my 
question, and I know that you will do the same. So I already 
anticipate the answer, but it may be that some of the people 
that are in the room today would like to hear this question. 
The Federal Government, through its various and sundry 
programs, sponsors research in our public and private colleges 
and universities across the country, and it is not an 
insignificant amount of money, whether it is coming through the 
National Science Foundation's budget or wherever. And then, one 
of these home runs occur.
    My question to them was, how does the taxpayer, that is 
generating all this revenue, the $3 trillion or so that we seem 
to spend every year, how do they get reimbursed? Why don't they 
have an exclusive license or a royalty position in regard to 
one of these home run discoveries? And I would just like to 
hear you comment on that, and your general impression of maybe 
a misperception in regard to that, and we can start from my 
left to right with Dr. Pradhan.
    Mr. Pradhan. Thank you, Mr. Gingrey.
    It is--every invention that gets licensed out of an 
academic institution needs substantial development that needs 
to happen, and there is an issue of taking the revenues from 
that licensing and reinvesting it, and universities have 
effectively done that, so any amount of income that comes in is 
reinvested into the system. Bayh-Dole requires that we share 
those revenues with the inventors, which we do, and then, we 
reinvest a majority, if not all of it, into the research and 
education enterprise, and the training enterprise of the 
university. So, I think that the public has a net benefit that 
arises from that.
    Dr. Butts. I think the foundation behind Bayh-Dole is that 
the public benefits, because the product gets into the 
marketplace, and you know, the question, I think you were 
raising is, is that fair, because the company that gets the 
license gets a lot of benefit, but I think that was really the 
concept, that in order to get products into the marketplace, 
you had to provide a business benefit, so that companies would 
take the risk and make the investment to do it.
    Mr. Johnson. I guess I would similarly. I think, you know, 
the ability for companies like Hewlett-Packard to create jobs, 
and to create new industries in the United States, where people 
pay taxes, and have, you know, a viable economic sense of 
being, is really a result of this. I think innovation is the 
key to our world economic competitiveness, and this sort of 
research allows us to stay ahead of the curve. You know, 
everybody else in the rest of the world has really benchmarked 
us, China, India, Singapore, they have taken our best 
practices, they have gone off, and now, they are competing, and 
they are competing very well.
    So, I think the degree to which we can benefit U.S. 
companies in the U.S., creating jobs, is really the way this 
gets paid back.
    Dr. Lemley. Everything that the three witnesses have just 
said is true, but of course, it is true only in the 
circumstances in which we wouldn't have gotten the 
commercialization of the invention that was federally funded 
without Bayh-Dole and university patenting. If we had a 
circumstance in which we would have gotten the technology to 
the public without the patenting, and they would have paid less 
money for it, then the public is contributing money, but they 
are not getting the full benefits of it. And that, I think, is 
why there is a greater opportunity or role for the government 
to have this occasional oversight, to make sure that the 
results, the fruits of federally funded inventions aren't 
locked up unfairly, or in ways that might damage public health.
    Dr. Allen. I have a slightly different view than my four 
colleagues. I think that it is very rare that the home run 
invention is worked on and available in the academic 
laboratory, to the point where it is ready to be lifted 
directly from the laboratory and put into commercialization. I 
quoted what turns out to be relatively inexpensive factor of 
$100 of private investment required for every dollar of public 
investment, and I heard quoted, The Economist, $10,000 of 
private investment for every dollar of public investment.
    Certainly, it is true that this is going to be industry 
specific, but I think that unless we have the capability of 
exclusive access to some of these home run patents, we will 
never get through, in my particular case, the regulatory 
hurdles associated with a new medical device. And I would point 
out as well that the companies that are commercializing these 
are not only benefiting themselves, but also, all of their 
employees, all of the new jobs that are created, and so forth, 
a very important factor.
    Mr. Gingrey. And I thank all of the panelists. And 
obviously, the more jobs, the more people pay in taxes, the 
multiplied effect of that, making our country more globally 
competitive, and I hope, if we have another round, that I will 
get an opportunity to come back, and maybe ask the question 
about that global competitiveness as well.
    Thank you.
    Chairman Wu. Dr. Gingrey, I can guarantee you another 
round.
    I understand, Dr. Lemley, that you may have a flight this 
afternoon, and we want to be sensitive to your schedule. And 
so, I think that I have one further inquiry, based on comments 
that you made earlier, and I think I, and the rest of the 
committee would dearly appreciate your sticking with us as long 
as you possibly can.
    You mentioned that one of the challenges, one of the 
opportunities or challenges, is to get universities to take a 
broader view of their role in society, and in tech transfer, to 
maximize all of the different roles, which a major research 
university should be playing in our society. What are some of 
the things that can be done, culturally, within a university, 
or statutorily, or through financing mechanisms, to encourage 
that kind of shift? What are some of the things that might be 
helpful in reorganizing the tech transfer function within a 
university, to try to serve that broader societal function?
    Dr. Lemley. It is an important question, and I want to 
start by confessing a fair bit of ignorance, so I will offer 
some suggestions, but there are people far more qualified than 
I to talk about the kind of organizational structure of 
universities.
    But I think one thing that clearly can be done is the kind 
of best practices benchmarking among universities that we have 
heard discussed here today. If it is, in fact, the case that 
from the industry's perspective, there are some universities 
that are perceived as hard to deal with and others that are 
perceived as easier to deal with, and that as a result, 
university collaborations with private sectors are flowing to 
those universities, then I think there is an opportunity for a 
trade association, like AUTM, to sit down and figure out what 
does make that work, do that kind of best practice 
benchmarking.
    The other thing I would suggest, with respect to the 
organization of the universities is that the more isolated the 
technology transfer office is from the mainstream life of 
research in the university, the more likely I think we are to 
see the kind of short run, profit maximizing mentality that I 
was concerned about. And so, anything you can do to build the 
technology transfer office more clearly into the Vice Provost 
for Research or whatever the departmental structure is, to make 
sure that those technology transfer offices are rewarded not 
just by how much money did you get, but also, by some other 
measure of number of collaborations or university satisfaction, 
and probably, I think, also, the sort of logical endpoint of 
that is to discourage what I have seen some universities from 
doing, which is to entirely outsource the function of 
technology transfer to a private company, that is just in the 
business of holding and licensing university patents.
    Chairman Wu. Before we broaden that discussion to the rest 
of the panel, let me ask you, Dr. Lemley, is there a problem 
with the metrics? Because one of the easy things to do when you 
are running a business or running any kind of enterprise is to 
count dollars, and you know, sometimes, you just count what you 
can count, and then, you wind up with a metric that doesn't 
serve anyone well.
    Is there a problem with metrics in this arena?
    Dr. Lemley. Yeah, I think there is, because as Mr. Johnson 
indicated, in the information technology industries, a lot of 
the value of patents to private companies comes not in the form 
of revenue that they generate, but in the form of cross-
licensing or freedom to operate, and that is the sort of value, 
those inventions have the sort of value that easily gets lost 
if all we are counting is what is the percentage of the 
royalty, or what is the total number of dollars that are coming 
in at the end of the day.
    Chairman Wu. Do any of you have suggestions about 
alternative metrics, or as a best practices suggestion? Arun?
    Mr. Pradhan. Thank you, Mr. Chairman.
    AUTM has been engaged in an effort to look at the metrics 
and surveys that currently get published in the AUTM licensing 
survey. Just as a brief point of history, the licensing survey 
began in the early '90s, as a means of benchmarking 
institutions with each other, to take a look at what activities 
were being performed by the respective technology transfer 
offices.
    Seventeen years later, the role of technology transfer, as 
we have heard in this panel and in this discussion, has 
changed. We participate much more in economic development. We 
participate much more in strategic alliances. The models for 
industry, the models for the way that industry does business, 
have changed, and over the last year, our Vice President for 
Metrics and Surveys has been engaged in an activity with the 
funding from the Kauffman Foundation and others, to review what 
additional measures need to be looked at, what outcomes need to 
be looked at, not just activity.
    Chairman Wu. Mr. Johnson.
    Mr. Johnson. You know, I think it comes back, so you get 
what you measure, and if you are measuring licensing income, 
then people will be eager to do that. I think that is 90 
percent of what is at the difficulty of the licensing offices 
that we have trouble negotiating with. One of the major a-ha 
moments that I had in our work out in the Bay Area centered 
around, when I finally realized that the average amount of 
industrial or sponsored research is somewhere between 5 and 7 
percent of the total research or the university budget, 
depending on how you define it.
    In the cases that have been mentioned previously, Georgia 
Tech, and MIT would be another example, their amount of 
industry funding is on the order of 20, over 20 percent. So, 
again, you see the difference in philosophy of engaging as a 
strategic partner, where that is a viable outcome of the work 
that faculty are supposed to be doing. It is part of the 
mission statement, but in the case of the average, it is 5 to 6 
percent, so you might ask well, what else could you measure? 
Well, companies give money in many ways. There are grants that 
go without any licensing requirements at all. There is 
philanthropy. There are gifts from companies. If you measure 
all the places along this continuum, you can see that if you 
pick one specific area that generates 5 percent, it might 
impact all of the others. And the others are actually much 
bigger, so in the cases that work, Berkeley would be a good 
example, the Provost there has actually pulled the industry 
sponsored research and the licensing office together, and they 
are measured on the net outcome of both. So, I think that is a 
best practice. That has actually substantially reduced the 
amount of time that we take to negotiate with UC Berkeley.
    Dr. Butts. I agree there are two ways to win, then, either 
to secure a license, or to have a sponsored research agreement. 
So, I certainly feel that having, because there are typically 
two separate offices in universities that deal with those 
things, so if you have both technology transfer and sponsored 
programs reporting to the same person, then there is the 
ability to measure that bigger impact, whether it is in money 
coming in for research or money coming in for licensing. So, I 
definitely feel that that is what distinguishes some of the 
universities that are easiest to work with.
    Chairman Wu. Thank you very much. Dr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you.
    I want to have Dr. Pradhan comment a little bit about the 
Nine Points, in regard to licensing university technology. 
Because I think in his written testimony, that is a very 
interesting concept. But before that, I want to turn to Dr. 
Butts and Mr. Johnson, and ask this basic question.
    What are the reasons your companies, maybe Mr. Johnson 
feels more strongly about this, Dr. Butts, than you do, that it 
is easier to deal with foreign universities, and seek 
partnerships there? Where is there such a roadblock, as it 
seemed that Mr. Johnson had a lot of heartburn over? Let us cut 
to the chase on that, and tell us what the problems are, and 
maybe Dr. Pradhan can say how the Nine Points recommendation 
could solve those problems.
    Mr. Johnson. Well, I think if you look at the reasons why 
companies actually do research overseas, it is many faceted. 
Matter of fact, referenced in my testimony is the Thursby study 
called ``Here or There,'' sponsored under GUIRR, and with 
Kauffman, about why do we actually go to do this. So, part of 
the answer around why the fact that our competitors out there, 
these are governments driving university investments, as I have 
said before, have benchmarked us, have looked at our best 
practices, and by the way, I don't think they think Bayh-Dole 
is a best practice, per se. I think what they are looking at is 
the level of investment, the encouragement of engineering 
graduates in the technology field of science.
    So, when we go there, they are eager to collaborate. They 
are eager to compete. We have significant presences in all 
those countries, manufacturing and R&D. We go there for access 
to talent, the access to the resources provided, and the 
marketplace that we are trying to sell in. So, it is a 
combination of factors as to why we are there in the first 
place. Then, when we get there, and we develop the 
partnerships, we find that this eagerness allows them to want 
to participate with Hewlett-Packard or Microsoft or IBM. They 
really move rapidly to complete the research agreements. And it 
is not really encumbered by any of the issues that we find in 
the U.S.
    So, we are there for certain purposes that are strategic to 
our company, and then, the ease of doing business is much 
better, and then, we run into the roadblock in the U.S. at some 
places, so the natural answer is to go there instead of here.
    Dr. Butts. Well, I welcome the chance to address this 
question, because I would like to mention something that hasn't 
come up in our discussion today, and that is that useful 
inventions are rare outcomes from sponsored research at 
universities. So, in fact, one of the reasons why foreign 
universities are easier to collaborate with is that what they 
really want is the partnership. They would like to have the 
funding for their research, and they would like to have the 
opportunity for their faculty and students to work with 
companies who are providing interesting problems for them, and 
recognize that the chances, let alone a home run invention, but 
even just an invention that is useful, are small.
    So, I think that what we see outside the U.S. is that there 
is a heavy focus on the value of the research partnership, and 
all the benefits that flow from that, and very little concern 
about what if there is a patent. So, the whole approach outside 
the U.S. is different, and it is really focused on the research 
and the partnership, and not on potential value of investments 
that might come from the research.
    Mr. Gingrey. Dr. Pradhan.
    Mr. Pradhan. Thank you, Mr. Gingrey. The Nine Points 
document is something that establishes consistent guidelines 
across institutions. It is meant to be flexible. It is meant to 
promote licensing approaches, as the introduction suggests, for 
comparable technologies, and does vary considerably from 
industry sector to industry sector.
    What it does establish are the protection of certain core 
values that a university, or an academic institution has. For 
example, the right to publish. For example, the making research 
tools broadly available across industry sectors, as well as to 
other institutions. The right to practice the licensed 
technology, and allow other academic institutions to practice 
that technology, as well.
    So, then, extrapolate that to also successful practices, 
and working with companies on research. In terms of using 
similar approaches, which is taking a look at things by, sector 
by sector, preserving rights to use it ourselves, and then, 
moving forward. So, I think it starts the process of consistent 
implementation of Bayh-Dole.
    Chairman Wu. Thank you, Dr. Gingrey.
    I would like, in a few minutes, to turn to whether some of 
the Nine Points would be basis for more of a guideline focus. 
Now, we have just spent some time talking about changes that 
one might make in the university enterprise. I would like to 
focus now on the phenomenon of going overseas with sponsored 
research, and to what extent is this driven by sort of, if you 
will, free market hunger for collaboration, and to what extent 
are there sometimes, I just read about this at times, if you 
want to sell airplanes in certain places, there is a co-
production requirement at times. Are we facing some of those 
issues in sponsored research, as we look at Russia, China, 
India, or some other places around the world? Do we run across 
that kind of conversation?
    Dr. Butts. We have not encountered that, Chairman Wu. In 
fact, our research with universities is often so far upstream 
that it is not really tightly linked to our manufacturing, so I 
think the issue comes up more when companies want to market, 
sell, or manufacture in a foreign country. For the most part, 
our research is really driven by the more fundamental side, and 
so, we have not encountered those sorts of requirements.
    Mr. Johnson. I would say we encounter those from time to 
time, and I think it is more about if you fall into the role of 
corporate responsibility, being a good corporate citizen. If 
you are HP, and you are only selling in that country, and they 
have a broader objective, we want to be their partner, their 
long-term partner.
    Chairman Wu. So, it may not be expressly said, but it is 
one of the, perhaps, understandings of life.
    Mr. Johnson. It is implicit that you are investing, I mean, 
the best partnerships, and this includes the supply chain 
business, the success of supply chains.
    Chairman Wu. Please proceed.
    Mr. Johnson. The success of supply chains is sort of not 
throwing it over the wall and asking people to come up with the 
lowest price. It is investing in your other, in the other 
ecosystem. So, I think that is true in countries around the 
world. I also would tell you that there are many countries 
coming to us with research investments, laboratory facilities, 
saying please come here, we want HP or Microsoft or IBM to be 
part of this.
    And there is a third situation that I can cite in Brazil, 
where the tax law gives an incentive to work with universities. 
Instead of paying taxes, we are allowed to invest as a tax 
nonpayment, to pay it into research that we fund and we direct 
inside university systems. So, I mean, that is a win-win. We 
didn't pay tax, but we funded research inside a university. So, 
we have an extensive amount of university research in Brazil, 
but it was an incentivization through the tax system, as one 
example.
    Chairman Wu. Does anybody else want to comment on this 
factor, before we move on?
    There was some mention of Tax Code issues, and I want to 
ask about that, and then, Arun, I want to turn to you for other 
potential barriers to tech transfer. There was some mention of 
tax issues, the treatment of bonds that are used to finance 
buildings and limitations on unrelated business income.
    For those who choose to or want to, can you address that 
issue for me briefly, clearly?
    Dr. Butts. I would like to give it a try. I will do my 
best. I am not a tax expert, but as you have already mentioned, 
many universities use tax exempt bonds to finance building 
facilities, and in order to preserve the tax exempt status of 
the bonds, they have been given a safe harbor by the IRS with 
regard to doing collaborative research. And basically, as long 
as they stay within that safe harbor, they know that their 
bonds are protected.
    And the safe harbor is actually, from an industry 
standpoint, pretty small, and it says that you cannot give 
preference to a research sponsor in licensing foreground 
inventions, and that for universities to stay in that safe 
harbor, they have to be careful that they are making sure that 
they can show that they are licensing an invention at a fair 
market value. If you don't know what the invention is, it is 
hard to show that if you agree up front what the invention is 
going to cost, that it is a fair market value. So, that 
provision really makes it extremely difficult for a company 
like mine to have the assurance that we would like that we are 
going to be able to execute a license that we feel is done at a 
reasonable cost, if the university has to stay in that safe 
harbor.
    Chairman Wu. Anyone else wish to address that issue, before 
we--Mr. Pradhan, I believe that in your written testimony, you 
mentioned that there are some barriers to technology transfer. 
Can you, can we come back to that, and address what barriers 
you are talking about, what can be done to eliminate some 
barriers, whether they are real or perceived, what federal 
statutes there might be, what State statutes there might be?
    Mr. Pradhan. Thank you, Mr. Chairman.
    I think some of the real barriers are exactly what we have 
referred to here. The Tax Code, for example, is a potential 
barrier in effective collaborations and licensing. There are 
perceived barriers with respect to positions that a particular 
entity might take in the negotiation process, and are 
attributed to Bayh-Dole. I don't think that a negotiation is 
anything more than that. It is a negotiation, and also, from my 
perspective, from my personal experience in working with 
companies, and we have discussed this a little bit, when you 
are able to sit down with them and articulate to them some of 
the issues with respect to, for example, the tax laws, the 
business model, that would derive benefit for an academic 
institution versus, so, for example, nonexclusive, royalty-free 
licensing versus exclusive licensing, that those barriers tend 
to go away.
    So, at the end of the day, one of the most effective means 
of achieving success is education, but not only at the academic 
institution level, but also, at a company level. I think we 
understand some of the issues that relate to us. We are not as 
cognizant of some of the issues, as they relate to companies. 
And the flip side of that is also true, that they understand 
some of the issues that are very important to them, but don't 
completely understand the issues as they relate to academic 
institutions.
    So, in very brief summary, I think it is a matter of 
educating both sides, with respect to effective means of 
establishing licensing partnerships, as well as research 
partnerships.
    Chairman Wu. Thank you very much. I think I heard most of 
that, but the rest of it, I will read from the written record. 
My apologies to you all, or perhaps you will be relieved. We do 
have a series of seven or eight votes coming up, and I think 
that the right thing and the humane thing to do is to recess 
the panel in about ten minutes.
    A couple of you have obliquely, or perhaps a little bit 
more than obliquely, referred to issues where despite the fact 
that research may be privately funded, that the direct research 
is privately sponsored research, that there is a line drawing 
challenge in negotiating with universities, and that this is 
probably a challenge on both, for both parties, but what a 
university takes title to, versus what is, shall we say, 
sponsored research uncontaminated by federal funds. For those 
who choose to address this issue, can you illuminate the 
outlines of that issue a little bit more for the Committee?
    Dr. Butts. I would like to address that issue. I think that 
we see a whole range of ways of looking at how Bayh-Dole should 
apply, and one that I frequently hear from universities is the 
statement, if one federal dollar touches your project, then 
Bayh-Dole has to apply. And I think in reading the implementing 
regulations that that clearly was not the intention, and that 
what you really need to do is look at the statement of work for 
the program that is being funded privately, and if, in fact, it 
is not overlapping with any work that is being funded by the 
Federal Government, then I think Bayh-Dole should not apply.
    But I think there is some concern in the university 
community about not doing something that will cause difficulty 
with their federal sponsors, so the easy answer is take a very 
broad interpretation, and say because we have so much federal 
money in our laboratories, there is no way that your project 
cannot somehow be, can run without being impacted by federal 
dollars.
    Mr. Johnson. I agree with Susan's comments. It is sort of a 
mine, yours, or ours kind of thing. I mean, this ought to be 
just common sense, but when you look at the complexity of 
looking at prior background IP across, say, the entire 
University of California system, to determine whether they have 
looked at, and you have made sure that any possible connection 
to your research has been identified, it is a daunting task by 
itself.
    So, if you are making a bet on this, and you have got a 
large institution, and there is all this uncertainty, then what 
do you do? And that, again, causes a breakdown. So, it is more 
common sense that well, this is fundamentally mine, or mostly 
yours, and I am just trying to buy into it. Those are the sort 
of conclusions we would like to make rapidly, but this thing 
overhangs it, and it is difficult.
    Chairman Wu. Would legislative clarification be helpful in 
this arena?
    Mr. Johnson. I will go out on a limb, and say I think it 
might be, in this particular case, just because, you know, the 
idea, as Susan pointed out, just touching something. I mean, 
the Federal Government funds just about every kind of research 
that I know, so I am sure I am going to touch some of it. So, 
some clarity there, I think would be helpful.
    Chairman Wu. Other viewpoints on that particular question?
    Mr. Pradhan. I think it would be possibly a wrong path to 
go down, and provide legislative oversight along those lines. I 
think the issue is more of----
    Chairman Wu. Do you agree that there is an essential 
problem here?
    Mr. Pradhan. Yes, I do, but I don't think it is rooted in 
Bayh-Dole. I think it is rooted in value allocation of what 
has, or going to be created. I think it is also based on the 
relative contributions that the two parties, or the three 
parties make to whatever occurs.
    It is a question of access, and it is a question of 
control, and----
    Chairman Wu. Mr. Pradhan, then, at what relative 
contribution would you say this is sponsored research, 
privately sponsored research, and not subject to, shall we say, 
Bayh-Dole contamination, and at what percentage would you say 
that this vests in the university?
    Mr. Pradhan. I don't think--sorry.
    Chairman Wu. Please proceed.
    Mr. Pradhan. I don't think universities take, or all 
universities take the position of Bayh-Dole contamination. I 
don't believe that that is an issue here. We take a position, 
where we have our faculty, who are our employees, and by 
policy, need to assign to universities intellectual property 
that is created as a result of their work. If the issue is, 
then, assignment of that intellectual property back to a 
particular company for further development, yeah, we need to 
take a look at that carefully, and sometimes, we do, for 
example, in clinical trials that we conduct, take into account 
what is being brought to the table by the company. That is a 
model that we can effectively use for other means, as well.
    Chairman Wu. My apologies, Mr. Pradhan, but because there 
is a vote clock ticking, I would like to move the discussion 
along, but let us come back, perhaps, you all have some 
written--things that you would like to submit in writing.
    As I was reviewing this issue, one of the questions that 
developed in my mind, for Dr. Butts and Mr. Johnson, we could 
address this legislatively, but it seems to me that going into 
the relationship of sponsored research, that to the extent 
there is an issue here, if it is not taken care of by the 
relationship, that a private entity, a sponsoring entity, could 
get representations and warranties, and an undertaking from the 
university. You can already tell that, you know, I am the kind 
of guy that you don't like to get involved in technology 
licensing, but you could get those reps and warranties from the 
university, that this is sponsored research. Why doesn't that 
take care of it up front?
    Dr. Butts. I just think that the issue of being able to 
clearly define when are federal dollars involved and when are 
they not is difficult, and I have had people say to me, well, 
in order to do what you are suggesting, Mr. Chairman, this 
faculty member would have to move into a different building and 
work in a separate laboratory, so that there was basically no 
federal funding in the area, which I think is really more than 
the Act requires, but it is that level of certainty that I 
think many people want to have, in order to make sure that they 
are not somehow failing to meet the obligations under Bayh-
Dole.
    So I think, you know, some clarity about is it really that 
necessary to totally segregate the research, or is there a way 
that federal dollars and industry dollars can be funding 
separate projects, and still be, not have Bayh-Dole apply, I 
think would be very helpful.
    Chairman Wu. Dr. Allen.
    Dr. Allen. Briefly, I think that this is a very important 
point. I think it is, in some sense, almost independent of 
Bayh-Dole. I think if industry comes to my laboratory to do 
some research, part of the reason is because I have built up, 
or I, by extension, Georgia Tech, have built up over the years 
expertise in an area that is very valuable to that particular 
industry.
    And so, I do agree with you, Mr. Chairman, that the way to 
solve the issue of who is contributing 1 percent, or 99 
percent, or whatever it is, to the ultimate collaboration, is 
one to be negotiated between the private parties, as opposed to 
bringing in the Bayh-Dole situation.
    Chairman Wu. Perhaps you all are relieved, but I apologize 
for needing to bring this hearing to a close. It would not be 
fair to you, or to the other attendees, to recess for seven or 
eight votes, and then to come back.
    I do feel that we have just barely scratched the surface of 
this very important, large topic. It is my intention to return 
to this subject, and to try to get it right, rather than to get 
it fast, and sometimes, one of the most difficult things to do 
around this institution, do nothing. And we will consider 
carefully what the right things are to do for the next 
generation of Bayh-Dole, which will affect, I believe, several 
future generations of Americans.
    I did not have a chance to discuss some of my experiences, 
either with domestic universities or, in particular, with 
foreign universities, and whether the challenge is changing 
American conduct, or whether the challenge is in, perhaps, 
developing standards for conduct elsewhere in the world. We 
will return to these subjects.
    If there is no objection, the record will remain open for 
additional statements from members, and I do hope that we will 
be able to ask you all questions, and that you will continue to 
help us in our consideration of these issues.
    Without objection, so ordered. The hearing is now 
adjourned. Thank you all very, very much.
    [Whereupon, at 3:12 p.m., the Subcommittee was adjourned.]


                              Appendix 1:

                              ----------                              

                   Answers to Post-Hearing Questions

Responses by Arundeep S. Pradhan, Director, Technology and Research 
        Collaborations, Oregon Health & Science University; Vice 
        President for Annual Meetings and Board of Trustees, 
        Association of University Technology Managers

Questions submitted by Chairman David Wu

Impact of Federal Statutes

Q1.  Several witnesses commented in their testimony that Bayh-Dole is 
only one of several federal statutes that play a role in shaping the 
interactions and relationships between universities and industry. What 
are other important statutes, and how, if in any way, do they 
discourage technology transfer, and industry-sponsored university 
research? Do you see bright line rules which would help universities 
lower the perceived risk of the loss of non-profit status or federal 
research funding?

A1. The impact of the Bayh-Dole Act on research and university-industry 
interactions has been much more positive than negative. Comments made 
by my colleagues on the panel seem to imply that the Bayh-Dole Act 
discourages university-industry research relations. This is erroneous.
    University-industry relations encompass a variety of relationships, 
such as collaborations, multi-party consortia, material transfers, 
government-university-industry partnerships, sponsored research 
agreements, and licensing arrangements. Each relationship is defined by 
a set of complex issues of which patent ownership (the issue addressed 
by the Bayh-Dole Act) is one. Other issues relate to research conducted 
in tax-exempt bond financed facilities; valuation of inventions that 
have yet to be created; the nature of the industry sector; and, the 
desire of companies to negotiate payment of the full burden of expenses 
associated with research (reimbursement of Facilities & Administrative 
costs). In addition, the mission of a company typically focuses on 
generating revenue through commercialization of products and is 
fundamentally different from that of a university that focuses on 
research, education and public service. The Bayh-Dole Act remains 
supportive and flexible to allow universities to address these issues 
and the financial support of a particular university research 
laboratory.
    One of the other panelists raised the impact of the federal rules 
governing tax-exempt bond financing. While these rules present 
limitations to pre-determining the value for a future unknown 
invention, they do not change the fundamental principles of 
universities to retain ownership of their technology, determine 
appropriate values for commercial use of federally-funded technology, 
and ensure that these public assets are appropriately developed for 
maximum utilization to benefit the public. Therefore, any changes to 
such laws would not alter significantly the university-industry 
relationship.
    Even without the issues created by tax-exempt bond financing, there 
are real problems in establishing a value for technology that is yet to 
be created, as neither the company nor the university know the actual 
market for the technology or what further development will be necessary 
to bring the technology to market. Further, trying to pre-value the 
unknown inventions would create greater contention between the 
respective parties as each party would have an incentive to value 
unknown inventions at either extreme of the spectrum. As I have stated 
in my prior testimony, the issues are mainly based on the cultural 
distinctions between the different industry sectors and that the nature 
of the transaction is a negotiation which needs to be conducted in good 
faith.
    In addition, the Stevenson-Wydler Technology Innovation Act (15 
U.S.C. 3710 et seq.) provides the basis for federal agencies and 
laboratories to enter into Cooperative Research and Development 
Agreements (CRADAs). CRADAs encourage technology transfer from federal 
laboratories (including some managed by universities and some in 
collaboration with universities) to the private sector.
    In summary, I do not believe that federal statutes play a 
significant role in discouraging university industry research 
relations. Rather the opposite, federal statutes encourage and require 
such beneficial relationships. In addition universities would and do 
accommodate industry's desire to know the commitments for research 
collaborations and follow-on licensing to the extent that we reasonable 
can.

Impact of State Laws

Q2.  You noted in your testimony that since 2005, 19 states have 
launched initiatives targeting innovation by investing in university 
R&D--including R&D incentives and tax incentives for the private sector 
to partner with universities. How do State laws shape the university-
industry collaboration environment? Do these laws pose any additional 
barriers, beyond those created by some federal statutes, for 
university-industry collaboration? Please explain.

A2. Most State laws are flexible to encourage university-industry 
collaborations in various fields of research. Very few states have 
enacted legislation that requests a share of the licensing income and/
or require that technology developed be first licensed to local 
companies or be the basis of start-up companies in the name of economic 
development. Where such State laws and regulations exist, they may pose 
obstacles in venturing with out-of-state companies and leveraging State 
and federal funds together. On the other hand, States laws that provide 
R&D tax credits to corporations who fund research in the state 
encourage these important research investments.
    The initiatives that I have outlined in my written testimony and 
other initiatives of which I am aware, do not limit the interactions of 
universities to local and regional economies. The initiatives 
capitalize on the ability of universities to retain ownership of 
intellectual property, function as engines for economic growth in the 
region, and partner with companies across a wide range of disciplines. 
I am not aware of any of these State laws creating additional barriers 
for university-industry collaboration.

Overseas University-Industry Collaboration Trends

Q3.  Industry witnesses expressed concern that policies at some 
universities are discouraging university-industry cooperation, and, as 
a result, companies are turning to conduct sponsored research overseas. 
How are universities tracking these international developments and how 
are universities responding? Are there changes to the Bayh-Dole statute 
that are needed to respond to these developments?

A3. Policies at universities protect academic freedom, education of 
students, integrity of the research enterprise, and utilization of 
research results for the public benefit and do not discourage 
university-industry research collaborations. The issue is one of 
negotiation and a meeting of the minds to achieve a mutually beneficial 
arrangement. Companies expand overseas due to pressures of 
globalization, not merely because U.S. universities are hard to deal 
with. As Mr. Johnson indicated in his testimony, there are multiple 
factors that are taken into consideration; for example, building R&D 
centers and working with overseas universities often are a response to 
penetrating overseas markets. To blame U.S. universities for companies 
outsourcing R&D to foreign universities is deceptive. The relatively 
few firms that assert that U.S. universities are difficult to work with 
claim that overseas universities are willing to agree to different 
terms than U.S. universities, but overseas universities have different 
histories, interests and drivers.
    The approach of U.S. industry in chasing ``easy'' foreign 
universities strikes me as the same short-sightedness that led to the 
concerns that resulted in the Bayh-Dole Act. In addition, most major 
foreign universities either have or soon will have policies similar to 
U.S. universities. Many countries are investing heavily in their 
universities to entice companies to establish bases there and to 
benefit from subsidized research. As foreign universities gain more 
experience they will recognize the importance of intellectual property 
in preserving the integrity of their research programs as well as the 
damage generated by giving away all of their valuable intellectual 
property for quick revenue enhancement. These universities will become 
less likely to assign away ownership of invention rights that are 
critical to continuing their research, ensuring that graduating 
students and collaborators can continue to utilize their research 
results, attracting future research funding, and maximizing utilization 
of their technologies in multiple fields of use. We are in fact seeing 
these trends in Singapore, Taiwan, and Japan. AUTM is partnering with 
universities and individuals, who are very interested in seeking to 
replicate U.S. models of technology transfer in these countries and 
others.
    It also remains the case that, some countries' observation of 
international agreements and intellectual property rights is limited at 
best. Trying to enforce agreements for example in China, India and 
other countries is challenging and costly.
    In fact, many multinationals are coming from overseas to U.S. 
universities! Foreign-based multinational firms are building R&D 
centers near U.S. universities and entering into long-term 
collaborations. Further, these relationships are established on terms 
that both companies and the U.S. universities find acceptable! The 
companies tell us our terms are different than they encounter with 
universities overseas, but they understand the issues of academic 
freedom, advancing research, protection of students, intellectual 
property rights, and that this is the way that business is done in the 
U.S. and they see the advantages.
    I would also like to point out that Dr. Gary Schuster, Provost and 
Vice President for Academic Affairs at Georgia Institute of Technology, 
testified in the July 26, 2007 hearing before the House Committee on 
Science and Technology on the impact of globalization of R&D and 
innovation on American universities. Dr. Schuster stated that many 
foreign companies are establishing research collaborations with U.S. 
universities.
    According to the National Science Foundation's 2006 Science and 
Engineering Indicators, from 1997 to 2002, R&D investments made by 
foreign firms in the U.S. grew faster than R&D investments made abroad 
by U.S.-based multinational corporations. During 2002, while U.S. 
affiliates of foreign companies accounted for 5.7 percent of the total 
U.S. private industry value, R&D conducted by U.S. affiliates of 
foreign companies accounted for 14.2 percent of the industry R&D 
conducted in the U.S. This demonstrates that the process of 
globalization is at work with companies investing and seeking 
collaborations in other countries and that, foreign companies are able 
to successfully enter into research collaborations with U.S. 
universities.
    Taken with the 28,000 active licenses in the U.S. between companies 
and universities last year to develop useful products, the many more 
R&D agreements in place between companies and U.S. universities 
indicates an enormously active research enterprise. Even companies 
espousing that U.S. universities are hard to deal with have active, 
sizable research partnerships and licensing programs with U.S. 
universities.
    In summation, policies at universities do not discourage 
university-industry partnerships; the Bayh-Dole Act plays a minimal 
role in these types of collaborations; most universities would like to 
establish ties with industry, but not at the expense of becoming 
``company shops''; and companies would like to access the expertise at 
the U.S. universities. An example of a common negotiation is that most 
universities would be happy to grant non-exclusive licenses to 
companies in the IT sector, as long as the universities retain the 
ability to offer additional non-exclusive licenses. However, the 
company's request for non-exclusive licenses is often accompanied with 
the right to sub-license, no payments towards patent expenses, and the 
license is irrevocable. Under such circumstances, if the university 
were to grant such a license, it would not be fulfilling its obligation 
as a steward of public resources and further, would be entering into a 
relationship that was not mutually beneficial.
    So I am concerned and deeply puzzled by the continuing profile 
given to the erroneous viewpoint that U.S. universities are hard to 
deal with, which is contrary to the facts and appears strictly based on 
anecdotal evidence.

Foreign Legislation

Q4.  We hear that other countries are copying Bayh-Dole. What are the 
goals of the legislation in countries which have passed similar laws? 
Have differences in goals lead to different metrics for universities in 
technology transfer and university-industry collaboration? Are there 
changes to the Bayh-Dole statute that are needed?

A4. The objective of the countries that are also emulating the Bayh-
Dole Act is to quite simply duplicate the astounding success of the 
Bayh-Dole Act in their own territories. The effect of these new changes 
overseas is too nascent to assess their impact at this time, especially 
in achieving the respective objectives established by different 
countries. One likely outcome will be more consistent treatment and 
collaboration between faculty and students across the globe. As 
policies enabling collaboration are regularized to respect research 
teams' contributions to the public, university-owned intellectual 
property is likely to be treated more similarly, as has been achieved 
with intellectual property laws. This is likely to enable faster 
validation of early-stage university technology, and easier entry into 
foreign markets for U.S. companies.
    I do not believe any changes to the Bayh-Dole Act are required at 
this time to address this issue.

In the Public Interest

Q5.  Dr. Lemley, in his testimony, said universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology. And you included in your testimony the 
March 2007 white paper, In the Public Interest: Nine Points to Consider 
in Licensing University Technology. How could technology transfer and 
university-industry collaboration be conducted to better serve the 
public interest? What might the impact be on industries with different 
business models?

A5. The most effective technology transfer occurs when both parties 
understand each other's needs and arrive at an arrangement that is 
mutually beneficial. Negotiations and discussions between the parties 
should not be confused with legislative, regulatory or policy issues. 
Most universities do take a broad perspective when entering in to a 
research relationship or a licensing transaction and remain cognizant 
about different industry clusters and respective business models. Some 
of the challenges that universities address during a research 
negotiation include cultural differences between the academic and 
corporate environments, ownership of university-developed intellectual 
property, licensing rights to such intellectual property, background 
rights, confidentiality and publication rights, tax issues, export 
control (under certain circumstances), and access to research 
materials.
    The public interest is served best when universities enter into 
research relationships that are consistent with the university mission 
of research, education and public service. This includes retaining 
ownership of technology that the university develops and consistently 
ensuring that technology is transferred to the commercial sector in 
many different ways--through education, training, source of employees, 
and licenses to intellectual property. Part of the obligations under 
the Bayh-Dole Act requires universities to ensure that inventions are 
diligently developed for the public benefit. This requires negotiation 
of terms for diligent development of federally-funded technology as 
well as terms that permit universities to terminate licenses where 
appropriate utilization is not taking place.
    The ``Nine Points'' document serves as a guide for universities to 
ensure that the public interests are taken into account and that any 
arrangement between the university and a potential licensee is 
effective in the utilization of the licensed technology. A number of 
the points articulated in the document are currently part of policy 
and/or widely practiced. This document consolidates these issues into a 
succinct guide that provides a perspective on why such issues are 
important and need to be considered. We hope that the Nine Points white 
paper helps our industry collaborators to understand better the 
academic environment.

Small Business Perspective

Q6.  In the hearing we discussed both university and large corporation 
perspectives on the impact of Bayh-Dole. How do you think the 
experience of small business with Bayh-Dole differs from that of large 
corporations? Please distinguish between experiences you think are 
unique to individual industries from experiences you believe are common 
to all small businesses.

A6. Many of the Nation's large corporations have significantly reduced 
their efforts to engage in fundamental research and development. The 
Economist recently observed, ``Companies tinker with today's products 
rather than pay researchers to think big thoughts.'' Therefore, a 
significant number of large firms are not themselves as engaged in 
early-stage research, and therefore the Bayh-Dole technology transfer 
process, as are small businesses. The issues related to this move away 
from early stage research have very little to do with the nature of 
university-industry relations and more so with the need for these large 
corporations to continually meet targets established by Wall Street, 
reduction of costs and overheads, and the introduction of the next 
version of the product at a faster pace.
    Small businesses, in contrast, are a vital part of the Bayh-Dole 
technology transfer process. $42 billion was spent on R&D in U.S. 
academic centers in 2005. With the support of Bayh-Dole, universities 
transferred this technology primarily to small businesses. In a 
majority of these relations, venture capital and angel investors 
facilitated this process by providing ``risk capital'' to facilitate 
this process. In 2006 alone, venture capitalists made over 3,400 
investments and angel investors over 51,000 in small businesses, and 
together investing over $50 billion in small businesses.
    In return, small businesses make good stewards for the transferred 
technology. The Small Business Administration recently said that 
``small firm innovation is twice as closely linked to scientific 
research as large firm innovation on average, and so substantially more 
high-tech or leading edge.'' More notably, the same SBA study observed 
that small businesses are necessary to ``maintain the diversity in our 
country's innovative capacity which is a source of economic strength 
over the long-term.'' That is because small business bring new, high-
risk technologies to market, they invest in new business methods and 
models, and they provide competitive pressure on large corporations.
    Therefore, it is my understanding that the small business 
perspective on Bayh-Dole is fundamentally different than a large 
corporation. Small businesses see the Bayh-Dole Act, partnerships with 
universities, and other sources of federal research as vital to their 
future business objectives and they act accordingly. Large 
corporations, in contrast, invest proportionally less in university 
collaborations, recognizing that, in anything, Bayh-Dole may represent 
a source of competitive threat to an existing product or technology's 
incumbent position.

Best Practices

Q7.  During the hearing, the witnesses discussed a number of best 
practices which improved university-industry collaboration on industry 
sponsored research. Please summarize, in priority order, your top 
recommendations to improve collaboration on industry sponsored 
research.

A7. It is obvious that there cannot be a single set of ``Best 
Practices.'' In fact, the term ``Best Practices'' implies a singular 
approach to a situation, which as we are discovering is untrue. Even 
within the industries represented by the other co-panelists 
(information technologies and chemicals), there is a wide spectrum of 
what each seeks in their respective interactions with universities. 
Each technology and university-industry collaboration represent unique 
sets of circumstances that must be carefully considered to ensure a 
mutually beneficial relationship to all parties. This leads to a 
negotiation of either a simple or complex set of issues to determine 
the respective rights and obligations of the parties under either a 
research agreement or an appropriate license agreement. The same issues 
and drivers that apply to the case for negotiating license agreements 
can be extrapolated to negotiations in university-industry research 
collaborations. It is this search for a singular set of Best Practices 
which often blocks effective collaborations, as the circumstances 
regarding early-stage research vary greatly.
    The following recommendations to improve collaboration on industry 
sponsored research would apply equally to companies as well as 
universities:

        1.  Understand the culture and needs of the other party.

        2.  Be aware of federal and State regulations that might play a 
        role in the nature of the relationship.

        3.  Don't negotiate the Facilities & Administrative rate 
        associated with the project.

        4.  Avoid pre-valuing intellectual property that has not yet 
        been created.

        5.  Negotiate separately the licensing rights to any background 
        intellectual property.

        6.  Ensure that companies as well as the faculty are aware of 
        issues related to conflict of interest.

        7.  Recognize that universities must continue to maintain their 
        academic principles and are not serving as a hired company 
        laboratory when participating in a research collaboration.

        8.  Recognize that industry sponsored research is not a source 
        of ``un-obligated money,'' i.e., faculty need to be aware of 
        the expectations of the company when entering into a research 
        relationship.

        9.  Operate with an open mind, in good faith and on a 
        reasonable basis to arrive at mutually beneficial arrangements 
        on issues concerning intellectual property; publications; and 
        confidentiality.

Federal Government Oversight

Q8.  The Federal Government has an important oversight function for 
Bayh-Dole to insure that university patenting serves its intended 
purpose and is not misused. What specific oversight do you recommend, 
including oversight by individual agencies funding federal research at 
universities?

A8. One of the initial purposes of the Bayh-Dole Act was to ensure a 
streamlined and uniform federal policy across all federal agencies with 
respect to inventions arising from federally funded research. Differing 
policies by individual agencies were ineffective, confusing and 
administratively burdensome. It is extremely important for the Federal 
Government to provide strong and consistent oversight and 
implementation of the Bayh-Dole Act in order to continue the enormous 
success of the Bayh-Dole Act into the next 25 years.
    Over the years, a few agencies have needed clear guidance on the 
proper implementation of the Bayh-Dole Act as they have strayed from 
the standard clause and established regulations. With the recent 
passage of the COMPETE Act and expected elimination of Technology 
Administration in the Commerce Department, it is unclear who will 
assume the oversight function of the Bayh-Dole Act. Because much of the 
Commerce Department is focused in other areas and Commerce 
organizations, such as NIST, is specifically designed to function as a 
national research laboratory that also funds research, a more 
appropriate placement would be the Office of Science and Technology 
Policy (OSTP) which has a broad policy focus to ensure consistent 
implementation across all federal agencies and laboratories. We 
encourage Congress to transfer oversight function to such an office.

                   Answers to Post-Hearing Questions

Responses by Susan B. Butts, Senior Director, External Science and 
        Technology Programs, The Dow Chemical Company

Questions submitted by Chairman David Wu

Impact of Federal Statutes

Q1.  Several witnesses commented in their testimony that Bayh-Dole is 
only one of several federal statutes that play a role in shaping the 
interactions and relationships between universities and industry. What 
are other important statutes, and how, if in any way, do they 
discourage technology transfer, and industry-sponsored university 
research? Do you see bright-line rules which would help universities 
lower the perceived risk of loss of non-profit status or federal 
research funding?

A1. In addition to Bayh-Dole there are two other important federal laws 
and regulations that impact technology-related interactions between 
universities and industry: the Internal Revenue Code of 1986 (and the 
clarifying Revenue Procedure 2007-47), and the cost principles, 
specifically the cap on university overhead, described in OMB Circular 
A21 Section G.8. Each of these impacts the university-industry 
relationship in a different way which I will explain below.
    There is a key distinction that I want to make before addressing 
the specific laws and regulations. This is the distinction between 
situations in which university inventions result directly from research 
that is funded by the government versus research that is funded by 
industry. In the former case no company has a vested interest in the 
invention so the university should take the commercialization path most 
likely to get the invention into use for the public good. In the latter 
case the company that sponsored the research has made an investment and 
should have preference in using patentable inventions that result from 
the research. Industry sponsored university research is different by 
nature and important to U.S. competitiveness. In contract to federally 
funded basic research in which projects are proposed by faculty members 
and competitive grants are awarded based on the funding agency's 
judgment of technical merit, industry funded research projects 
generally are framed by the sponsoring company based on its knowledge 
of the technology and market and are intended to answer a scientific 
question or solve a technical problem that may ultimately lead to a new 
or improved product or manufacturing process.
    In my opinion, the most significant legislative barrier to 
university-industry research collaborations is the understandable 
concern that universities have regarding their non-profit status and 
the tax-exempt status of their bonds. The Internal Revenue Code of 1986 
sought to prevent companies or individuals from deriving private 
benefit from or making private use of non-profit institutions and tax-
exempt bonds. I am not qualified to comment on the specific language in 
the tax code or how to interpret it. However, there is a concern on the 
part of universities that giving preference to a industry research 
sponsor in licensing inventions resulting directly from the research 
funded by the sponsor may constitute private use and, therefore, 
endanger their non-profit status as well as the tax-exempt status of 
any bonds used to finance the facility in which the sponsored research 
was conducted. Revenue Procedure 2007-47 (which recently superseded 
Revenue Procedure 97-14) creates a safe harbor regarding tax exempt 
bonds. It sets forth conditions under which a research agreement does 
not result in private business use under the IRS Code of 1986. Section 
6.02 in the Revenue Procedure describes these conditions for corporate-
sponsored research as follows: ``. . .if any license or other use of 
the resulting technology by the sponsor is permitted only on the same 
terms as the recipient would permit that use by any unrelated, non-
sponsoring party (that is, the sponsor must pay a competitive price for 
its use), and the price paid for that use must be determined at the 
time the license or other resulting technology is available for use. 
Although the recipient need not permit persons other than the sponsor 
to use any license or other resulting technology, the price paid by the 
sponsor must be no less than the price that would be paid by any non-
sponsoring party for those same rights.''
    This safe harbor is problematic for companies that wish to sponsor 
research. First, it provides for no credit toward the cost of the 
license to be given to the sponsor for the investment that the sponsor 
made up-front in the research. This investment includes not only the 
funds provided to pay for the research project but also other 
contributions such as proprietary information (technical or business) 
used to frame the research problem, use of company-developed 
noncommercial materials or prototypes, and use of results of related 
research and testing performed by the sponsor. Second, the university 
alone determines the competitive price or market value of the license. 
It has been our experience that universities tend to overvalue 
inventions, and it is in the interest of the university technology 
transfer office to make the royalty as large as possible. Third, and 
most problematic for many potential sponsors, is that they cannot have 
any assurances before entering into the research agreement that they 
will be able to have reasonable access to inventions that may occur nor 
that they can prevent these inventions from being licensed to a 
competitor. It is very difficult for a potential industry sponsor to 
justify the business risk involved in sponsoring research on the terms 
specified in Revenue Procedure 2007-47.
    Since these regulations are peculiar to the United States they 
contribute to the pressure for potential industry sponsors to take 
their research projects to foreign universities. I believe that the 
barrier to university-industry research collaborations created by the 
IRS Code and clarifying revenue procedures could be significantly 
lowered by amending the tax code and regulations to allow the 
university to include licensing terms (such as royalty rates or caps 
for field-specific licenses) in the sponsored research agreement 
without incurring the private business use penalties as long as the 
research otherwise satisfies the university's non-profit mission (e.g., 
the research results will be published, the research provides an 
educational opportunity, etc.). Such a change would not obligate 
universities to include such terms in industry-sponsored research 
agreements but it would allow them to do so without jeopardy to their 
non-profit and tax-exempt status. Such pre-licensing terms would then 
be subject to university policy and negotiation under appropriate 
circumstances. This would not give an unreasonable private benefit to 
industry sponsors and would level the playing field relative to 
universities in the rest of the world.
    The second barrier to technology transfer and industry sponsored 
research is actually an indirect barrier stemming from the cap on the 
overhead rate that universities can charge on their federally funded 
research projects. The federal overhead cap as proscribed in OMB 
Circular A21 Section G.8 (facilities and administration (F&A) costs are 
limited to 26 percent of the modified total direct costs) has been in 
place for more than a decade and is insufficient to cover the actual 
F&A costs that universities now incur. Since the cap was first imposed 
universities have been subject to numerous additional federal 
requirements relating to health and safety as well as homeland security 
(e.g., tracking foreign students and complying with export control 
laws). This shortfall in government funding for real costs creates a 
funding gap that universities have to make up from other sources. One 
source is licensing revenue. This leads many technology transfer 
offices to seek to maximize royalty income even though it may 
jeopardize the relationship with potential industry licensees and 
research sponsors. I believe that the basis for the federal overhead 
rate cap should be re-evaluated and that F&A charges against research 
grants and contracts should reflect reasonable costs for 
administration, including federally-mandated compliance programs.

Impact of State Laws

Q2.  Mr. Pradhan noted in his testimony that since 2005, 19 states have 
launched initiatives targeting innovation by investing in university 
R&D--including R&D initiatives and tax incentives for the private 
sector to partner with universities. How do State laws shape the 
university-industry collaboration environment? Do these laws pose any 
additional barriers, beyond those created by some federal statutes, for 
university-industry collaboration? Please explain.

A2. State initiatives generally have a positive but limited impact on 
the university-industry collaboration environment. The impact is 
positive because the incentives generally promote collaborations but 
limited because the incentives usually pertain only to companies which 
have research and/or manufacturing operations within the state. The 
initiatives typically are directed toward creating new technology that 
will ultimately lead to new jobs in the state. This is understandable 
since the funding for these initiatives comes from the State's tax 
payers. While these initiatives will foster more local research 
collaborations they are unlikely to have a significant impact on 
innovation since they fail to take into account the global character of 
research and development. Large companies will choose to work with the 
best research partners around the world, not the closest ones and 
successful new products will come from the most competitive, market 
aligned technology.

Foreign Legislation

Q3.  We hear that other countries are copying Bayh-Dole. What are the 
goals of the legislation in other countries which have passed similar 
laws? Have differences in goals led to different metrics for 
universities in technology transfer and university-industry 
collaboration? Are there changes to the Bayh-Dole statute that are 
needed?

A3. It is true that a number of countries have implemented (e.g., 
Japan) or are contemplating (e.g., India) legislation similar to the 
Bayh-Dole Act. They generally have the same purpose as Bayh-Dole, 
namely to facilitate transfer of government funded university 
technology to businesses for development and commercialization but the 
exact mode of operation reflects national circumstances and priorities. 
The U.S. is unusual in that the Federal Government was the largest 
source of research funding when Bayh-Dole was enacted, and it is still 
the main source of research funding for universities. In some other 
parts of the world industry is a more significant source of funding for 
university research, and the nature of the relationship between 
universities and industry is more symbiotic, less competitive. The 
universities see their role to be education and research and industry's 
role to be employment and innovation. It is still the norm outside the 
U.S. that universities assign title to subject inventions (those 
arising from the sponsored research project) to the sponsor since it is 
the sponsor's role to develop and commercialize the inventions. I have 
not yet seen an adverse impact on university-industry research 
collaborations due to Bayh-Dole-type legislation in other countries 
since the legislation is focused on transfer of government-funded 
technology rather than industry sponsored research, and research 
partnerships with industry, especially large or multinational 
corporations, are seen as desirable and prestigious.
    I am not aware that other countries have established new or 
different metrics for technology transfer. The U.S. is still considered 
to be the leader in moving university technology out to the marketplace 
so most countries that enact Bayh-Dole-type legislation will likely use 
the same metrics that have been established in the U.S., namely, number 
of licenses granted and amount of licensing revenue generated. This 
could be counterproductive to university-industry research 
collaborations since it focuses attention on licensing activity rather 
doing research and than getting new technology to market. In my answer 
to Question 5 below I have provided some suggestions for more 
appropriate and meaningful metrics.
    I believe that there are many positive features of the Bayh-Dole 
Act and that minor changes could alleviate the barriers that it has 
posed to university-industry research collaborations. The Bayh-Dole Act 
was intended to promote the licensing of inventions made with federal 
funding by universities to businesses for subsequent development and 
commercialization. It recognizes the critical need for a company to 
have a secure position with regard to the university's intellectual 
property in order to risk making the large investment needed to develop 
the invention and bring it to market. Bayh-Dole provides sufficient 
flexibility in the various ownership and licensing options to 
accommodate a wide range of business models and industry sector needs. 
These options range from the university retaining title to the patent 
and granting a royalty-free nonexclusive license (which is often 
preferred by industry sectors such as information technology) or a 
royalty bearing exclusive license (which is preferred by the 
pharmaceutical industry as long as the royalty is reasonable), to 
actual assignment of ownership of the invention to a company with 
permission of the federal funding agency. Bayh-Dole does not require 
universities to patent discoveries that can best be used for the public 
good by putting them into the public domain through publication nor 
does it require universities to charge the highest royalty that the 
market will bear. Thus, Bayh-Dole is a sound piece of legislation that 
reasonably addressed the key problem at the time of its enactment: that 
the U.S. public saw little benefit from federally funded university 
inventions because industry would not invest in developing and 
commercializing inventions that were held in the public domain. Bayh-
Dole has had a negative impact on university-industry relations when 
taken beyond its intended and stated purpose, namely, when used as a 
means for universities to try to generate the maximum licensing income 
which makes successful commercialization of inventions less likely and 
when it is applied to privately funded (rather than federally funded) 
research which discourages such private funding. The latter impact 
could best be addressed by Congress clarifying that the Bayh-Dole Act 
(and the rights and obligations of the university there under) does not 
apply when private (e.g., industry) funds pay for a specific research 
program. Such a clarification would not obligate universities to change 
the way they deal with intellectual property from industry-sponsored 
research. It would, however, allow those institutions that value 
industry partnership to have more flexibility and a wider range of 
options regarding ownership and licensing of foreground intellectual 
property and, thus, attract more research collaborations with industry.

Preference for U.S. Industry Requirement

Q4.  Dr. Butts--You commented on the ``Preference for U.S. Industry 
requirement'' in Bayh-Dole (35 U.S.C.  204), and say that concerns 
about this restriction have resulted in recommendations from both 
government and industry that this be addressed. How do you think this 
requirement should be changed and what would be the potential impact?

A4. My comment was made specifically in reference to the application of 
Bayh-Dole to direct government funding of industry research. However, 
the same issues can occur when federally funded university inventions 
are licensed to companies. The preference for U.S. industry requirement 
stipulates that any product embodying the subject invention will be 
substantially manufactured in the U.S. This is problematic to companies 
that have global markets or foreign affiliates or subsidiaries. A 
company may not be able to satisfy global demand at a competitive cost 
if most manufacturing must occur in the U.S. This could be due to a 
lower cost of raw materials or labor outside the U.S. or to a high cost 
of shipping manufactured products to other parts of the world. For 
example, the extremely high cost of natural gas, a primary feedstock 
for petrochemicals in the U.S., makes commodity chemicals produced in 
the U.S. very expensive relative to those produced in other parts of 
the world.
    I believe that U.S. preference in manufacturing should be removed 
or made a negotiable term rather than a requirement. This change would 
make it more attractive for companies with foreign markets and 
operations to work with the Federal Government to develop new 
technology that could benefit the U.S.

In the Public Interest

Q5.  Dr. Lemley, in his testimony, said universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology. And Mr. Pradhan included in his testimony 
the March 2007 white paper, In the Public Interest: Nine Points to 
Consider in Licensing University Technology. How could technology 
transfer and university-industry collaboration be conducted to better 
serve the public interest? What might the impact be on industries with 
different business models?

A5. I agree with Dr. Lemley's statement but I do not believe that the 
Nine Points document provides a reasonable approach for doing this. The 
Nine Points document was written by representatives from eleven large 
U.S. research universities and the Association of American Medical 
Colleges. As the preamble points out, it reflects certain shared 
perspectives that emerged from their brainstorming about university 
technology licensing. It has a very strong focus on medical- and life 
sciences-related research and licensing of inventions to companies that 
manufacture pharmaceuticals or medical devices. The Nine Points 
document does not address other areas of technology, such as the 
physical sciences or engineering, nor does it include input from the 
companies that receive the licenses for university inventions. The 
perspective is one-sided and fails to recognize the business needs of 
the commercial companies that must take the risks and make the sizable 
investments needed to develop and commercialize the university 
invention. In contrast, the Bayh-Dole Act is enlightened in its 
recognition that industry must have a reasonable assurance of right to 
practice and competitive advantage, which may require including 
exclusive licensing, in order to make the investment needed to bring a 
technology to market.
    Going back to Dr. Lemley's comment that universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology, I believe that it is important to 
recognize the difference between transfer of existing technology that 
resulted from federally funded research on the one hand and industry-
sponsored university research which may or may not produce useful 
results, let alone patentable inventions, on the other hand. Different 
approaches are needed to encourage the two activities and maximize the 
social impact. No ``one size fits all'' approach will work.
    In the first case, technology transfer from federally funded 
research, judicious patenting and licensing of useful inventions that 
need protection for commercial development is appropriate. But where 
does the societal benefit come from? Is it from maximizing licensing 
revenues for the university or from getting new products to market? 
Many universities concentrate on the former but the greater benefit to 
society comes from the latter. This suggests that different metrics are 
needed to support and promote the most beneficial outcome. It is better 
to measure inventions in commercial practice since this reflects the 
real societal benefit rather than to measure number of licenses or 
amount of licensing revenue since both can occur without successful 
commercialization of the invention. The down side of measuring the 
number of inventions in commercial practice is that the time lag 
between licensing and commercialization may be years or even decades 
depending on the amount of technology development required. A more 
immediate and meaningful metric than number of licenses is the 
percentage of university inventions for which one or more licenses have 
been issued. A higher percentage would indicate that useful inventions 
have been patented and that the licensing terms are reasonable.
    In the second case, industry-sponsored university research, the 
societal benefit comes primarily from the opportunities provided by the 
research interaction on a real-world problem between faculty and 
students and the industry researchers. Such interactions can grow and 
lead to other benefits such as employment for graduates and gifts from 
the company. The amount of research funding from industry sponsors is 
an appropriate and immediate metric. There is no guarantee that the 
research effort will produce useful results and a patentable invention 
is a rare outcome. Fewer than five percent of the university research 
programs that my company has sponsored have produced an invention worth 
patenting. This low success rate is common for early stage research. 
Data from the Association of University Technology Managers Annual 
Licensing Surveys shows that, over a ten year period of time, member 
universities reported receiving $200 billion in research funding (from 
all sources) and filed 50,000 patent applications. This corresponds to 
a ratio of $4 million of funding to each patent application.




    On the other hand, the U.S. realizes considerable benefit when 
industry builds on the foundation of research performed at 
universities. Two recent studies sponsored and published by the Council 
for Chemical Research (www.ccrhq.org) show the annualized research 
investment and returns for the chemical sector in the United States. 
The Federal Government invests about $1 billion in research in the 
chemical sciences at universities and national laboratories and 
companies in the chemical sector invest an additional $5 billion in 
their own research programs. Together, these investments yield $40 
billion of growth in GDP and $8 billion in tax revenue for the Federal 
Government.




Small Business Perspective

Q6.  In the hearing we discussed both university and large corporation 
perspectives on the impact of Bayh-Dole. How do you think the 
experience of small business with Bayh-Dole differs from that of large 
corporations? Please distinguish between experiences that you think are 
unique to individual industries from experiences that you believe are 
common to all small businesses.

A6. There are several differences between large and small companies, 
regardless of industry sector, that can affect the impact of Bayh-Dole. 
The first is that small companies have fewer research assets 
(employees, facilities, equipment) and, therefore, less capability to 
perform all steps in the process from idea generation to development of 
a new product ready for commercial manufacturing and sales. This makes 
them more dependent on external research and intellectual property 
sources, including universities, than large companies are. The second 
is that small companies are often less able to support interactions 
with distant universities so they are more likely to work with local 
universities. The third is that small companies usually have fewer 
existing products to generate income so failure of even one new 
development effort could put a small company out of business. This, 
also, can make them more dependent on university partners for 
continuing research and development since the company cannot afford to 
walk away from a line of research in which it has invested heavily. 
Large companies, by contrast, develop many new product ideas in 
parallel. Their existing product lines provide profit to fuel the 
development of new products. They can, and do, abandon product concepts 
that do not meet technical or commercial milestones and targets. They 
cut their losses and redirect their research investments. Successful 
new products have to recover their own development costs as well as the 
costs of the failures. While large companies value collaboration with 
universities they usually have other options for achieving their goals 
and can walk away from prospective collaborations that are too risky or 
do not meet their business needs. They can do the work in-house, they 
can contract the work out to a private research laboratory, or they can 
find a capable research partner at another university somewhere else in 
the world. The net result is that small companies are more negatively 
impacted when universities are not responsive to their needs. One 
complaint that I hear from my colleagues in small companies is that 
U.S. universities take too long to negotiate licensing and research 
agreements and hold out for terms that are unfavorable to the company. 
Although both of these difficulties are damaging to the company's 
business opportunities it may have no other good alternative.

Best Practices


Q7.  During the hearing, the witnesses discussed a number of best 
practices which improved university-industry collaboration on industry 
sponsored research. Please summarize, in priority order, your top 
recommendations to improve collaboration on industry-sponsored 
research.

A7. Best practices need to take into account the needs and constraints 
of both universities and industry. A recent project sponsored by the 
Government-University-Industry Research Roundtable (GUIRR) in the 
National Academies brought together high level representatives from a 
range of industry sectors, types of universities, and various federal 
funding agencies to suggest ways to lower the barriers, particularly 
those involving intellectual property, to university-industry research 
collaborations. The project team produced a document called Guiding 
Principles for University-Industry Endeavors (available at http://
www.uidp.org/UIDP-PUBLICATIONS.html) which describes three 
principles that should be followed in order to promote win-win 
interactions. These principles require looking beyond individual 
transactions toward the benefits of longer-term partnerships. The three 
guiding principles are:

        #1  A successful university-industry collaboration should 
        support the mission of each partner. Any effort in conflict 
        with the mission of either partner will ultimately fail.

        #2  Institutional practices and national resources should focus 
        on fostering long-term partnerships between universities and 
        industry.

        #3  Universities and industry should focus on the benefits to 
        each party that will result from collaborations by streamlining 
        negotiations to ensure timely conduct of the research and the 
        development of the research findings.

    It is also important to recognize the circumstances leading to each 
research collaboration, the nature of the proposed project, and the 
contributions that each party makes to project. This is difficult to do 
when standardized templates are used for research agreements and when 
negotiations are policy based rather than principle based. The new 
University-Industry Demonstration Partnership (www.uidp.org), which is 
operating under the auspices of GUIRR, is developing a negotiation and 
education tool that will guide prospective partners through set of 
questions relating to the facts and circumstances of each project in 
order to identify reasonable terms and conditions for the research 
agreement. This consideration of circumstances and contributions is 
particularly important when it comes to dealing with foreground 
intellectual property that may result from the industry-sponsored 
project. If the sponsor is making a large contribution (funding and 
other resources) or has significant background intellectual property 
then the standard U.S. university research agreement terms are 
typically not acceptable to the industry sponsor.

Federal Government Oversight

Q8.  The Federal Government had an important oversight function for 
Bayh-Dole to insure that university patenting serves its intended 
purpose and is not misused. What specific oversight do you recommend, 
including oversight by individual agencies funding federal research at 
universities?

A8. I believe that a light touch is best in the area of oversight so as 
not to add unnecessarily to the administrative burden on universities. 
A constructive approach would be for each agency to state its 
intentions about how technology developed with its funding should be 
licensed and used. The NIH has provided such guidance in the past.
    Only some of the problems with university-industry interactions are 
due to government laws or regulation. Other problems stem from 
university and company policies or practices and cannot be fixed 
through legislation or governmental oversight.

                   Answers to Post-Hearing Questions

Responses by Wayne C. Johnson, Vice President, Worldwide University 
        Relations, Hewlett-Packard Company

Questions submitted by Chairman David Wu

Impact of Federal Statutes

Q1.  Several witnesses commented in their testimony that Bayh-Dole is 
only one of several federal statutes that play a role in shaping the 
interactions and relationships between universities and industry. What 
are other important statutes, and how, if in any way, do they 
discourage technology transfer, and industry-sponsored university 
research? Do you see bright line rules which would help universities 
lower the perceived risk of the loss of non-profit status or federal 
research funding?

A1. There appears to be a complex interaction between the Bayh-Dole 
legislation, tax-free municipal bonds, the IRS federal tax code, and 
perhaps other legislation that leads to differing and uncertain 
interpretations of what can and can't be done. I call it ``a perfect 
storm'' of things that are working against our efforts to collaborate. 
This complex confluence of laws, tax-exempt statuses, exemptions, and 
obligations, causes universities to take a conservative approach and 
declare that most, if not all, of the industry-sponsored research, 
should come under the Bayh-Dole umbrella. While I'm not an expert in 
this area, I believe that Susan Butts painted a pretty vivid picture of 
some of the challenges presented by this in her testimony. Although 
there are many challenging areas, I would like to briefly elaborate on 
three examples to illustrate some of the problems.
    Fair-market value and the inability to license up-front: One of the 
major sticking points arises because universities feel that they cannot 
determine (and hence license) the fair-market-value of a future 
invention up-front, essentially before the work has begun. Rather, they 
propose to their industry partners who sponsor research with them, to 
provide only an option to negotiate for a license later in time, once 
the IP is created and its fair market value has been determined. This 
means that, in the best case, the industry partners who sponsor various 
research activities are not assured access to the inventions that they 
are funding. They are relegated to having only an option to negotiate 
later (sometimes even a time-limited option) for a technology license, 
which could in fact be declined. In the worst case, a company could 
even be prevented from using a technology that they funded and 
developed, while the university shops it around to competitors, at a 
later date, presumably when the value is higher because the sponsoring 
companies have invested time and money building products and services 
that utilize the technology. Still, an even worse situation occurs when 
patent aggregators (``patent trolls'') buy-up these licenses and then 
prevent companies from bringing their own products to market--in effect 
holding them ``hostage'' after significant investment has been made. In 
these situations, Bayh-Dole is not only having a chilling effect with 
respect to university-industry collaboration, it is also discouraging 
investment and partnership in the very technologies that we desire to 
bring to market, for public benefit.
    Staying within the IRS-allowed safe-harbor: We've been told that, 
in order to preserve their tax-exempt status and stay within allowable 
guidelines for tax-exempt municipal bonds, industry sponsorship of 
university research must stay below a certain threshold. (sometimes 
only five percent, sometimes only 10 percent of a building or facility 
is allowed for private use.) That threshold limits industry 
participation, and reduces the amount of sponsored research that the 
university can perform in these buildings. This immediately puts joint 
collaborations into the positions described above, discourages industry 
participation (other than philanthropic), has a chilling effect on 
collaborative research, and prevents us from architecting the types of 
partnered experiences that enrich the faculty, produce well-educated 
students and give them a good experience of industry and universities 
working together.
    Intersection of concerns: When we look at this from a higher-level, 
it doesn't make sense in aggregate form, and causes immense frustration 
to industry. On one hand, we have tax-exempt bonds which lower the cost 
of building university buildings and facilities--a good move. We want 
private sector participation, so that the universities don't become 
islands unto themselves, and provide rich, relevant experiences for 
researchers and students--another desirable outcome. And then we 
immediately get into an argument about whether or not we can work 
together and do work in a particular lab that sits within a building or 
facility. I'm wondering if there's a way to clarify all this into an 
``acceptable use policy'' and provide operating parameters that foster 
and encourage a collaborative environment.
    Avoiding contact and seeking-out neutral territory: When an 
industry researcher literally ``comes onto campus'' for the purpose of 
interacting and collaborating with their university counterpart, there 
is a built-in conflict of interest that comes about. When researchers 
are hired by companies, they usually assign to the company they work 
for the IP rights to works that they create, while employed there. On 
the university side, there are laws that require universities to own 
the resulting IP that is developed in buildings that are built with 
tax-exempt funds. One of our researchers jokingly indicated that 
whenever he wants to have a technical conversation with any of his 
university colleagues, he invites them off-campus to Starbucks which, 
in effect, creates a kind of neutral ``de-militarized zone'' for 
collegial and collaborative discussions to take place. Here again, the 
collection of laws, practices, and boundary conditions we are faced 
with make it very difficult for universities and industry to 
collaborate, which is exactly what me must do in order to ensure a 
successful future.
    To summarize, across the Nation, university technology transfer 
offices and willing industry partners struggle greatly to determine 
what they can and can't do, in the face of this increasingly complex 
set of laws and obligations at the federal, State, and municipal 
levels. Whether it's the laws themselves, the perception of what is 
required, or simply the inability to determine what can work for both 
sides, is irrelevant. What is relevant is that these types of 
situations (of which I have described only four above) create a 
bureaucracy that makes it extremely difficult to work with American 
universities on research of mutual interest and benefit. What can take 
as long as two years to never to negotiate in a research agreement with 
an American university, is achievable in a matter of days with 
universities in Russia, China, and other countries (ref: Stan Williams 
testimony, Senate Committee on Commerce, Science, and Transportation, 
Subcommittee on Science, Technology, and Space, Hearing on 
Nanotechnology, September 17, 2002).

Impact of State Laws

Q2.  Mr. Pradhan noted in his testimony that since 2005, 19 states have 
launched initiatives targeting innovation by investing in university 
R&D--including R&D incentives and tax incentives for the private sector 
to partner with universities. How do State laws shape the university-
industry collaboration environment? Do these laws pose any additional 
barriers, beyond those created by some federal statutes, for 
university-industry collaboration? Please explain.

A2. I am not directly aware of any State laws that have been passed 
addressing these issues. However, I am aware of State funded program 
initiatives which began five or six years ago in California. These 
included the major institute programs that provided matching funds with 
the private sector, using an RFP process that picked the ``best of the 
best.'' HP has participated in several of these institutes, including 
CITRIS (Center for Information Technology Research in the Interest of 
Society) and CNSI (California NanoSystems Institute). These types of 
investments are exemplary, and they are directly tied to the states 
becoming more competitive, as well as the U.S. becoming more 
competitive. I think that those ought to be emulated. Furthermore, this 
work needs to be a combination of State and federal programs that will 
be successful in making us competitive, and one without the other 
doesn't make sense. If we are talking about laws around R&D incentives, 
I would be all for them.

Foreign Legislation

Q3.  We hear that other countries are copying Bayh-Dole. What are the 
goals of the legislation in countries which have passed similar laws? 
Have differences in goals lead to different metrics for universities in 
technology transfer and university-industry collaboration? Are there 
changes to the Bayh-Dole statute that are needed?

A3. A number of countries, such as Austria, Canada, Denmark, France, 
Germany, Ireland, and Spain, are considering or have enacted policies 
with respect to innovation and intellectual property. While the goal of 
Bayh-Dole was to transfer ownership for publicly funded inventions from 
the U.S. Government to universities, the goal of the policies in these 
countries is to change employment laws for university professors. They 
are no longer exempt from laws that give employers the IP generated by 
their employees--this new focus is on the retention of IP ownership for 
the benefit of the universities.
    Governments in countries such as Germany, Sweden, and Japan have 
initiatives to encourage the formation of technology licensing 
organizations in universities. In Brazil, their law is even stronger--
it requires (compels) universities to either form an agency to deal 
with IP or to use one established by another university. Their intent 
is to foster innovation and maintain R&D inside a productive 
environment, in order to provide for Brazil's technological autonomy 
and industrial development.
    Goals in other countries are driven by the belief that the U.S. 
university system has a big impact on our innovation economy. They are 
copying our policies without completely understanding our context. For 
example, UK universities like Oxford and Cambridge are not as well-
funded, so having the universities own and license IP does not make 
sense. Some people like David Mowery of Stanford have postulated that 
uninformed emulation of Bayh-Dole could be counterproductive in other 
countries, because a focus on licensing as the primary channel for 
technology transfer can have a chilling effect on the other (multiple) 
channels for moving knowledge and technology out into society.
    Although many university TTOs in the U.S. use gross licensing 
revenue as a measure of success, developing countries like Brazil and 
Mexico are having difficulty applying this metric. These countries 
invest less in R&D overall, with much of their investments typically 
accomplished through government funding. The lack of private sector 
investment in R&D in developing countries makes it much more difficult 
for TTOs in those countries to derive revenue through the licensing of 
technology. Instead, Brazil is using as a metric the number of patents 
and publications generated by a researcher.
    In discussions in Europe that I've had two years ago in the Glion 
colloquium, the practices that are similar to Bayh-Dole that have been 
transferred seem to be impacting the ability to do technology transfer 
in a negative fashion. Most every company that attended that consortium 
(Nestle (USA), DuPont (USA), HP (USA), Hoffman-Laroche (Switzerland), 
Fraunhofer-Gesellschaft (Germany) ) indicated that technology transfer 
had become more complicated as a result of U.S. ``best practices'' that 
center around Bayh-Dole. I do not know any specifics of Bayh-Dole being 
implemented in Russia, India, or China--which have significant interest 
by the major private sector area--but my work in other countries leads 
me to believe that this is not the case.

In the Public Interest

Q4.  Dr. Lemley, in his testimony, said universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology. And Mr. Pradhan included in his testimony 
the March 2007 white paper, In the Public Interest: Nine Points to 
Consider in Licensing University Technology. How could technology 
transfer and university-industry collaboration be conducted to better 
serve the public interest? What might the impact be on industries with 
different business models?

A4. First, let me address the ``Nine Points to Consider'' document. As 
I understand it, this was a document prepared by university vice-
provosts for research, research officers, and licensing directors for 
university technology transfer offices (TTOs). Its purpose was to help 
TTO staff understand the cumulative impact of their actions over time--
such as exclusive licensing, improvements, research tools, etc.--and 
how certain types of actions can reduce the university's future 
flexibility and freedom to operate. If not chosen wisely, actions taken 
in the present by TTOs could, in some cases, paint the universities 
into a corner which would be hard to remediate later.
    The ``Nine Points'' document was not put forward as, nor was it 
intended to be, a solution to the challenges in negotiating university-
industry collaborations, yet others have offered it as such.
    Because the ``Nine Points'' document is one of the few tangible 
expressions of detailed parameters having to do with technology 
licensing, it is being broadly used in ways beyond what was intended. I 
would like to point out that there are several examples of contract 
terms and parameters in this document (as it presently stands) that are 
simply unacceptable to industry and could not be used as a basis for 
successful negotiation, neither in IP-focused cases, nor in 
collaborative exchanges.
    What is needed, from a collaborative viewpoint, is an equivalent 
set of guidelines--let's call it ``Points to consider in fostering 
collaboration and knowledge transfer via multiple parallel paths.'' 
There is a whole spectrum of ways that knowledge and information moves 
outward from universities; licensing is just one of them. Consider the 
impact of publishing, open source development, participation in 
conferences, participation in professional societies, U-I 
collaborations, consulting. For decades, it has been widely recognized 
that the best method of knowledge transfer is students--highly 
educated, well prepared students that move to industry and other career 
destinations and utilize their knowledge for societal benefit. And this 
is in keeping with the core mission and primary focus of the 
university--to produce highly educated students.
    What we are experiencing now is a shift in focus away from 
knowledge and people (students) to licenses and things (``technology 
that is presumably sitting on a shelf'') for which it is possible to 
maximize revenue through technology transfer offices. Our experience is 
that the goal of maximizing revenue is getting in the way of increasing 
the transfer, dissemination, and utilization of knowledge and 
information (for public benefit), and at the same time, taking us away 
from the core mission and purpose of education.
    In considering the original question, ``How could technology 
transfer and university-industry collaboration be conducted to better 
serve the public interest?'' I would submit that the metrics are 
currently inappropriate and misguided. This has been written about by 
several authors in various papers. They observe that university TTOs 
are acting as if driven by a patent mentality, and a maximization of 
revenue objective. Yet what is needed is a flow of knowledge and ideas 
out to the public through multiple avenues (again, technology licensing 
is only one), and an understanding of the benefits of working 
collaboratively at multiple levels across the university-industry 
space.
    Even in the case of technology licensing and ``deals,'' the current 
metrics are still misguided. As has been pointed out in the literature, 
it would better serve our collective interests if TTOs were to maximize 
the number of deals that they do (with a goal of maximizing the amount 
of technology transfer), rather than maximizing the revenue that can be 
gotten from the smallest number of deals. The dynamics that support 
revenue maximization (as opposed to transfer maximization) force the 
TTOs into the role of ``gate-keepers'' that slow the flow of knowledge 
and information, which is again, directly in conflict with what Bayh-
Dole was intended to achieve. One research vice provost (whom I have a 
lot of respect for) tells his staff repeatedly that, ``the worst deal 
that we can make is `no deal,' '' thereby emphasizing the whole picture 
of multiple contributions to society, and a focus away from revenue 
maximization of a single deal.
    From my point-of-view, Dr. Lemley's point is extremely well taken. 
There is a much broader role that universities can play. The revenue 
objective is taking us away from solid and productive university-
industry relationships and interactions, away from knowledge transfer 
and collaboration, and is putting us on a dangerous path of ``go-it-
alone''--which is, again, the opposite of what Bayh-Dole was trying to 
achieve. In terms of licensing, the lure of revenue maximization is 
amplifying the ``home run'' patent mentality, which mostly applies to 
the pharma and bio-tech industries. Studies have shown that, if one 
removes the university licensing revenue received from pharma and bio-
tech ``home run'' patents, most university TTOs do not even recover 
enough revenue to cover their own administrative costs. So, in effect, 
what is happening is the dream of ``home run patents'' and revenue 
maximization is being chased by a bureaucracy that slows the transfer 
of knowledge and information, and erodes industry relationships and 
partnerships, that should be the cornerstone of our society. Further, 
it forces a ``one-size fits all'' treatment of intellectual property 
using the pharma and bio-tech models across all university-industry 
negotiations. On the industry-side, it feels like we are trading the 
bio-tech and pharma industry for all others, and ignoring information 
technology, information sciences, software, new media, clean energy, 
etc., who do not rely on the ``home-run'' patent mentality.

Small Business Perspective

Q5.  In the hearing we discussed both university and large corporation 
perspectives on the impact of Bayh-Dole. How do you think the 
experience of small business with Bayh-Dole differs from that of large 
corporations? Please distinguish between experiences you think are 
unique to individual industries from experiences you believe are common 
to all small businesses.

A5. From a background perspective, intellectual property plays a key 
role for entrepreneurial businesses, particularly in their early stages 
of development where start-up capital is being sought. Venture 
capitalists and other funding sources feel more confident about 
investing in a company which has a defensible IP that can contribute to 
a distinctive advantage, than they do in funding companies with 
competencies that are un-established, unproven, and perhaps easily 
duplicated. Even if their patents are not yet granted, but still 
applied for, intellectual property ownership gives them an added 
measure of credibility when seeking financing.
    Since most of my career has been doing work involving larger 
companies and universities, I don't have the additional perspective to 
comment beyond this.

Best Practices

Q6.  During the hearing, the witnesses discussed a number of best 
practices which improved university-industry collaboration on industry 
sponsored research. Please summarize, in priority order, your top 
recommendations to improve collaboration on industry sponsored 
research.

A6. From my experience, let me first say that the overarching theme of 
best practice is to understand that it is a long-term strategic 
multilevel partnership that develops the best results. I've been 
working in the university-industry space for many years, and have found 
that companies and universities need to understand this as a basis for 
everything they do.
    Second, universities and companies need to set an appropriate high-
level context and value the collaborative relationship more than they 
do any single activity or opportunity, utilize their interpersonal 
networks to advantage, and value research support as highly as license 
revenue. These higher-level philosophies or operating parameters give 
valuable guidance to individuals and departments acting on behalf of 
the institution or company, in this space. We also need to recognize 
that there are multiple paths for universities to get their knowledge 
and information transferred for societal impact.
    Third, I would recommend that we follow the Sponsored Research 
Interaction Process (SRIP) which was developed under BASIC (the Bay 
Area Science and Innovation Consortium). While the typical negotiation 
begins at a difficult entry point--emphasizing draft agreements which 
quickly lead to polarized positions, the SRIP model starts with the 
leadership of each organization committing to the relationship and the 
negotiating team focusing on the collaborative intent and the building 
of a shared understanding. Our experience in using this process yields 
a 10X improvement in negotiating a collaboration agreement--from 20+ 
months to two months! The essence of the SRIP model is:

          Build a team. Convene teams with the appropriate 
        members on both the university and industry sides. Each team 
        member should have a clearly identified role. Have a lead 
        person in each team accountable for getting to timely 
        agreement. Have the principals and negotiators meet face-to-
        face to build relationships and enhance rapport.

          Set expectations. It should be possible to get to 
        agreement with 1-2 face-to-face meetings, a couple of phone 
        calls, and a final closing meeting, all in a few days, spread 
        over 3-4 weeks. Instill in the team a sense of urgency. This 
        activity shouldn't drag on, nor should it be overly burdensome 
        or time-consuming.

          Work from the big picture (model). Set goals at the 
        right level to gain agreement, and establish metrics (such as 
        the total amount of research funding) that reflect 
        relationship-level thinking and not just transaction-level 
        thinking.

          Utilize a process that the team commits to use 
        (secure ``buy-in''). Secure strong sponsorship and commitment 
        to making it work. Educate all team members about the process 
        that they will use to communicate.

          Work the process creatively. All concerned must be 
        prepared to offer creative insights for working through tough 
        problems and navigating impasses.

          Have an escalation path. When stuck, leaders must 
        elevate reasoning to a higher-level of intent, focusing on the 
        broader collaborative relationship and how the planned research 
        work will benefit both industry and university.

Federal Government Oversight

Q7.  The Federal Government has an important oversight function for 
Bayh-Dole to insure that university patenting serves its intended 
purpose and is not misused. What specific oversight do you recommend, 
including oversight by individual agencies funding federal research at 
universities?

A7. I think that we ought to have a clear understanding of whether the 
goals of the legislation are being met, from a technology transfer 
point of view. Two key goals of the Bayh-Dole legislation are to 
promote the utilization of inventions arising from federally supported 
R&D, and to promote collaboration. Is it really accomplishing these 
goals? In aggregate, or only in specific situations? How would we know?
    While we've not been recommending changes to the legislation, many 
times throughout my testimony, as well as in the testimony of others, 
we've indicated that the exact opposite of what was intended to happen, 
is what has happened. This legislation didn't get put into place 
yesterday. It's 27 years old, and we've had plenty of time to figure it 
out. The results we have now are the results we're likely to have in 
the future. If it were up to me, I would focus on developing metrics to 
ensure that the intent of the legislation is being met. In industry, we 
understand the importance of having a closed-loop mandate for 
organizations--including a goal/objective statement, a set of 
operational parameters, and a set of metrics to ensure that things stay 
on track.
    In the world arena, knowledge exchange and collaborative 
engagements/partnerships are now the norm. They are supplanting 
technology transfer as the contemporary operating model for 
accomplishing joint work. Technology-transfer, and the operating model 
that lies beneath it, made sense 30 years ago. It is now obsolete in 
the IT, information sciences, and software industries. The properties 
of this operating model are such that it yields results that are poorly 
targeted, takes too long in development, misses out on important 
opportunity windows, encourages go-it-alone approaches, engages single 
(vs. multiple stakeholders), does not have a collective amplifying 
effect on innovation, nor does it support the development of broad 
ecosystems of value delivery. Our industry has moved beyond the 
technology-transfer paradigm, more into the collaborative arena with 
multiple industry partners working with multiple universities, for both 
individual and collective benefit.
    We know, anecdotally, that Bayh-Dole has broadly hurt 
collaboration, and in the best of cases, at least made it more 
difficult. We also know that, in many cases, Bayh-Dole has brought to 
the forefront a university focus on licensing, at the expense of the 
other forms of knowledge transfer and relationship development, not the 
least of which is the education of students. Within this licensing 
focus, we've seen that universities have been focused on maximizing 
revenue from the few patents that have high potential value (the 
``home-run'' patents, typical of the pharma/bio-tech industry), and not 
the aggregate portfolio of technology that could be transferred and 
gotten ``out-there'' for public benefit. They've been optimizing for a 
return of total revenue, and not maximizing the total transfer of a 
portfolio of technology (which, again, was what was intended by the 
legislation.)
    The goals of Bayh-Dole were right for the time. If we had also 
created the companion metrics when the legislation was written, I 
believe that we would have avoided many of the traps and pitfalls, and 
would now know with certainty where we are, and how much we've fallen 
short of the original intent.

                   Answers to Post-Hearing Questions

Responses by Mark A. Lemley, Professor of Law, Stanford Law School; 
        Director, Stanford Program in Law, Science, and Technology

Questions submitted by Chairman David Wu

Impact of Federal Statutes

Q1.  Several witnesses commented in their testimony that Bayh-Dole is 
only one of several federal statutes that play a role in shaping the 
interactions and relationships between universities and industry. What 
are other important statutes, and how, if in any way, do they 
discourage technology transfer, and industry-sponsored university 
research? Do you see bright line rules which would help universities 
lower the perceived risk of the loss of non-profit status or federal 
research funding?

A1. I do not know of other federal statutes that discourage technology 
transfer and industry-sponsored university research. One set of federal 
statutes and regulations that bear on this issue involve government 
procurement, and particularly Department of Defense procurement. 
Because the DOD often develops inventions in the course of designing 
specifications for private companies to supply, DOD regulations 
governing IP ownership and technology transfer are critically 
important.

Impact of State Laws

Q2.  Mr. Pradhan noted in his testimony that since 2005, 19 states have 
launched initiatives targeting innovation by investing in university 
R&D--including R&D incentives and tax incentives for the private sector 
to partner with universities. How do State laws shape the university-
industry collaboration environment? Do these laws pose any additional 
barriers, beyond those created by some federal statutes, for 
university-industry collaboration? Please explain.

A2. State laws generally are aimed at encouraging, not discouraging, 
university research and development and university-private sector 
partnerships. But they can occasionally raise issues. For example, the 
State of California has funded stem-cell research by public initiative. 
Part of that initiative requires that inventions developed through 
State funding be licensed in a way that benefits the State of 
California. While this makes sense given the State funding, it may 
impose barriers to broad licensing of the results of that research to 
private companies outside California, depending on how the law is 
interpreted.

Foreign Legislation

Q3.  We hear that other countries are copying Bayh-Dole. What are the 
goals of the legislation in countries which have passed similar laws? 
Have differences in goals lead to different metrics for universities in 
technology transfer and university-industry collaboration? Are there 
changes to the Bayh-Dole statute that are needed?

A3. Foreign countries are generally seeking direct foreign investment 
in research and development. While some foreign countries that pass 
Bayh-Dole type legislation may be particularly interested in the 
results of their own funding, my impression is that more commonly they 
are seeking to eliminate any perceived barriers that prevent 
multinational companies from investing in university research in their 
countries and licensing the resulting innovations on an exclusive 
basis.

Preference for U.S. Industry Requirement

Q4.  You recommend in your testimony removing provisions in Bayh-Dole 
which discriminate against licensing university inventions to foreign 
businesses (35 U.S.C. 204). Would you please explain your 
recommendation and its potential impact?

A4. I am a believer in free trade, particularly in IP. I think that in 
the modern, globalized world, there is no reason to prevent 
universities from licensing their technology to the company or 
companies best positioned to maximize its impact in the world. 
Sometimes--usually--those companies will be local, but not always. If 
no good local alternatives are available, universities should not have 
to choose an inferior licensing deal simply to encourage local 
manufacture.
    It is possible that eliminating section 204 will encourage some 
licensing to move offshore, but I think any such effect is likely to be 
minimal. And even if that happens, it will be offset by the benefits to 
American consumers of having university technology licensed more 
efficiently, and by the possibility that American companies can license 
technology from foreign universities.

In the Public Interest

Q5.  You recommended in your testimony that universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology. And Mr. Pradhan included in his testimony 
the March 2007 white paper, ``In the Public Interest: Nine Points to 
Consider in Licensing University Technology.'' How could technology 
transfer and university-industry collaboration be conducted to better 
serve the public interest? What might the impact be on industries with 
different business models?

A5. I believe the nine points Mr. Pradhan offered are a sensible place 
for universities to start in achieving what I believe must be their 
overarching goal: to maximize the beneficial social impact of new 
technology. Taking that goal seriously will, I suspect, mean that 
licensing will look different in different industries. In particular, I 
think it likely that exclusive licenses will make sense primarily in 
the biomedical and nanotechnology industries, which require a lot of 
time and effort to turn an invention into a marketable product 
acceptable to regulators. By contrast, I think exclusive licenses in 
the information technology industries would be quite rare under this 
approach.

Small Business Perspective

Q6.  In the hearing we discussed both university and large corporation 
perspectives on the impact of Bayh-Dole. How do you think the 
experience of small business with Bayh-Dole differs from that of large 
corporations? Please distinguish between experiences you think are 
unique to individual industries from experiences you believe are common 
to all small businesses.

A6. I believe the effect on small businesses is bound up with the 
industry-specific nature of the best practices I just noted. Small 
businesses that are started around a university invention usually want 
exclusive licenses to develop and practice that invention. Under the 
approach I outlined, this will likely be common in some industries but 
not others. On the other hand, an exclusive license benefits only one 
business, large or small, and disadvantages all others. Small 
businesses who do not need to invest large sums in making an invention 
marketable will benefit from a non-exclusive license, because they will 
all be free to compete to make the invention.

Best Practices

Q7.  During the hearing, the witnesses discussed a number of best 
practices which improved university-industry collaboration on industry 
sponsored research. Please summarize, priority order, your top 
recommendations to improve collaboration on industry sponsored 
research.

A7. My top three priorities for university best practices are: (1) 
adopt as a goal maximizing the social impact of the licensed 
technology, not short-term revenue. (2) structure and reward university 
licensing offices as part of the broader mission of technology 
transfer, and not on their short-term bottom line. (3) avoid exclusive 
licenses unless necessary to bring the technology to market, and if 
exclusive licenses are necessary, set benchmarks and required practices 
to ensure that the licensee is effectively commercializing the 
technology and not merely interfering with the ability of others to do 
so.

Federal Government Oversight

Q8.  The Federal Government has an important oversight function for 
Bayh-Dole to insure that university patenting serves its intended 
purpose and is not misused. What specific oversight do you recommend, 
including oversight by individual agencies funding federal research at 
universities?

A8. I believe granting agencies should require reports on patents 
produced as a result of their grants, to whom those patents were 
licensed, and under what conditions. They should also require that 
those licenses be made public. They should monitor progress under the 
license periodically, and should have a mechanism to field and evaluate 
complaints about the licensee if the licensee is interfering with the 
implementation of the licensed technology. If necessary, agencies 
should be willing to exercise their march-in rights under section 203 
to revoke an exclusive license or compel broader licensing on 
reasonable terms.

                   Answers to Post-Hearing Questions

Responses by Mark G. Allen, Joseph M. Pettit Professor; Regents 
        Professor, Georgia Institute of Technology; Co-founder & Chief 
        Technology Officer, CardioMEMS, Inc., Atlanta

Questions submitted by Chairman David Wu

Impact of Federal Statutes

Q1.  Several witnesses commented in their testimony that Bayh-Dole is 
only one of several federal statutes that play a role in shaping the 
interactions and relationships between universities and industry. What 
are other important statutes, and how, if in any way, do they 
discourage technology transfer, and industry sponsored research? Do you 
see any bright-line rules which would help universities lower the 
perceived risk of the loss of non-profit status or federal funding?

A1. The relationship between universities and industry is broad and 
multifaceted. Interactions range from universities providing a highly 
skilled workforce for U.S. companies to private industry support for 
the mission of universities through philanthropy. University research 
is just one part of that relationship and even that is highly variable 
depending on the nature of the research problem. Some research problems 
center on fundamental inquiry, some build on background intellectual 
property developed by one or both parties over an extended period of 
time, and some are simply short-term tactical problems--just to name a 
few. In many cases a program of research will proceed over a long 
period of time and be funded by the U.S. Government, private industry, 
and non-profit organizations that fund research. The Council on 
Governmental Relations and the National Council of University Research 
Administrators have both published documents identifying the many 
federal statutes that control university research in all these 
circumstances. I will not attempt to re-address those here but will 
mention the area of law and regulation affecting university technology 
transfer that is most often cited after the Bayh-Dole Act, the tax 
code.
    I am not an expert in tax law. It is my understanding that the 
general framework for the treatment of tax exempt organizations that 
perform research and transfer technology is that such institutions, 
since they benefit from public investment by virtue of their tax exempt 
status, must take steps to ensure that the public benefits from the 
results of the research, including patents, by making them available on 
a non-discriminatory basis. When universities take title to 
intellectual property that results from research, regardless of the 
sources of funds for that research, and licenses it to an entity that 
has or can attract the resources necessary to develop it into a new 
product, good or service, it seems to me it meets that test of public 
benefit. Exclusive licensing may be necessary for early stage 
technologies that require significant investment and require long lead 
times to ensure that investors have incentive to develop the 
technology. Non-exclusive licensing is a valid approach in industries, 
such as some sectors of information technology, where cross-licensing 
is common and the life of technologies is relatively short. The ability 
of universities to accept funds from industry and once the research is 
conducted license technology to industry on reasonable market-based 
terms does not seem to be impeded by the tax code.
    The roles and importance of the most common modes of technology 
transfer, the education of students and the publication of research 
findings, should not be overlooked or underestimated. Students that 
graduate from the leading research institutions in the United States 
carry with them to their eventual employers in private industry a 
wealth of know-how gained from their participation in research. 
Similarly, the robust body of peer-reviewed literature in each 
discipline is a primary mode of dissemination of research results both 
to industry and the public. The tax code supports these important modes 
of technology transfer. Two of the purposes for which university 
research may be considered to be in the public interest are the 
education of university students and undertaking research that will be 
published in treatises, theses, or other forms available to the public. 
Taken together with a third purpose, discovering a cure for a disease, 
the tax code supports the mission of research universities in serving 
the public including all sectors of private industry.
    Finally, the tax code anticipates that research will be undertaken 
by tax exempt organizations such as universities to aid a community or 
geographic area in attracting or retaining industry. This is consistent 
with the mission of research and technology transfer by universities. 
The existence of major research universities is an often-cited reason 
for the success of localities where high-tech industries have 
blossomed. This is likely to result from a combination of the 
availability of exciting new technologies based on federally-funded 
research and accessible to industry because of Bayh-Dole, a highly 
educated workforce, and closely available research facilities to 
address industry's questions through sponsored research and 
collaboration with top scientists and engineers.

Impact of State Laws

Q2.  Mr. Pradhan noted in his testimony that since 2005, 19 states have 
launched initiatives targeting innovation by investing in university 
R&D--including R&D incentives and tax incentives for the private sector 
to partner with universities. How do State laws shape the university-
industry collaboration environment? Do these laws pose any additional 
barriers, beyond those created by some federal statutes, for 
university-industry collaboration? Please explain.

A2. States have a legitimate interest in promoting strong interactions 
between universities and private industry for continued economic 
development including creation of new ventures and building new or 
existing industries. As noted above, strong research universities are 
correlated with development of high tech industries. For example, in my 
home state the Georgia Research Alliance (GRA), a public-private 
collaboration between the State of Georgia and private industry, has 
for a number of years fostered innovation through support for research 
in Georgia's universities. GRA achieves its goals through strategic 
investments at the state's leading research universities in eminent 
scholars, research laboratories and equipment, national centers for 
research and innovation and technology transfer programs. The support 
through endowed chairs and funds for equipment has been invaluable in 
expanding the research capabilities of institutions in Georgia. GRA 
supports technology transfer by matching research funds for 
translational research. Translational research occurs at the critical 
stage of technology development between the laboratory and the working 
prototype or demonstration of market feasibility.
    State governments provide significant support for State 
universities. Some State universities are State agencies or units of 
State government and subject to the statutes and regulations that apply 
to such agencies. State governments may seek to ensure that tax-payers 
in the state benefit from the State's investment in research 
infrastructure. Benefits to tax-payers may take the form of economic 
development, new products or services, increased research revenue that 
ultimately furthers the university's public benefit mission, or revenue 
from intellectual property that can be reinvested in research and 
education at the university where the discovery was made. The treatment 
of intellectual property contemplated by Bayh-Dole addresses the needs 
of State government to ensure public benefit and reinvestment in 
research and education.
    University requirements based on State laws that lead to protracted 
negotiation of research agreements with industry are not generally laws 
that deal with intellectual property matters. Rather, those cited by 
industry as impediments are most often issues surrounding 
indemnification provisions, dispute resolution, or open records. When a 
State agency is one of the parties to an agreement, it is probably 
reasonable for laws that apply to State contracts to be accommodated.

Foreign Legislation

Q3.  We hear that other countries are copying Bayh-Dole. What are the 
goals of the legislation in countries which have passed similar laws? 
Have differences in goals lead to different metrics for universities in 
technology transfer and university-industry collaboration? Are there 
changes to the Bayh-Dole statute that are needed?

A3. I do not have detailed knowledge of the specific foreign 
initiatives or legislation referred to in this question so it would be 
inappropriate for me to speculate beyond my experience in this area. 
However, I have also noted that in visits to universities in other 
countries, specifically Japan, Korea, and Switzerland, that the 
American model of university-based intellectual property creation, 
protection, and licensing is being held forward as a model to be 
duplicated.

In the Public Interest

Q4.  Dr. Lemley, in his testimony, said universities should take a 
broader view of their role in technology transfer, maximizing the 
social impact of technology. And Mr. Pradhan included in his testimony 
the March 2007 white paper, In the Public Interest: Nine Points to 
Consider in Licensing University Technology. How could technology 
transfer and university-industry collaboration be conducted to better 
serve the public interest? What might the impact be on industries with 
different business models?

A4. I agree that universities should be mindful of the public interest 
in their research, education and technology transfer activities. In the 
Public Interest: Nine Points to Consider in Licensing University 
Technology enumerates the tenets of licensing in the public interest as 
articulated by the signatory universities. However, licensing generally 
involves patented intellectual property or software protected by 
copyright. Technology transfer also takes place at universities in many 
other ways including the education of undergraduate and graduate 
students, publication of research findings in peer-reviewed 
publications, continuing education programs, symposia and seminars. 
Balancing these modes of dissemination of new knowledge is critical to 
maximizing the social impact of research. The following practices in 
the conduct of university-industry collaborations particularly tend to 
serve the public interest:

          Contractual assurance that researchers are able to 
        freely publish research results. Allowances for brief delay so 
        that patent protection can be obtained do not impede this 
        practice.

          Supporting graduate student research as part of the 
        collaboration.

          Encouraging the exchange of university and industry 
        scientists and their participation in symposia and seminars.

          Encouraging a number of companies to support research 
        in university research centers focused on problems in a 
        particular industry or technology area such as the Engineering 
        Research Centers funded by the National Science Foundation 
        which requires that universities recruit industry members for 
        the center.

    Patented intellectual property and copyright software are often 
best brought into public use by commercial entities that develop 
technology and the market for it. There are numerous examples of new 
drugs, medical devices, telecommunications technologies, and 
information technologies that resulted from university research that 
have changed or even saved the lives of Americans. Licensing of such 
technology serves the public interest. Milestone and diligence 
provision in the license ensure that the companies that license such 
technologies take the steps necessary to bring the technology to the 
marketplace. Common license terms further protect the public interest. 
By reserving the right to practice such technology in research and 
permit other universities and non-profits to do so, universities ensure 
that further development can take place. Granting exclusive rights to a 
defined field of use in a license encourages development and 
application of a transformational technology in more than one industry. 
These and similar license provisions help in finding the balance 
between broad access to technology and maintaining the value of the 
business opportunity for licensees.

Small Business Perspective

Q5.  In the hearing, we discussed both university and large corporation 
perspectives on the impact of Bayh-Dole. How do you think the 
experience of small business with Bayh-Dole differs from that of a 
large corporation? Please distinguish between experiences you think are 
unique to individual industries from experiences you believe are common 
to all small businesses.

A5. Bayh-Dole is particularly valuable to small businesses in the 
United States. Often lacking the infrastructure and funds to fully 
exploit in isolation their inventions, small businesses rely on 
partnerships with noncompetitive institutions such as universities that 
have more infrastructure, expertise, and resources. Bayh-Dole helps 
ensure that intellectual property can be created and protected during 
this process. In many small business enterprises, especially in the 
medical and pharmaceutical arenas, the ability to protect the 
intellectual property created in a small business-university research 
partnership (as opposed to allowing it to proceed into the public 
domain) is essential to future funding and success of the business, as 
I mentioned in my previous testimony. In other areas such as 
telecommunications, where freedom to practice is often as important as 
exclusivity, universities can still utilize the Bayh-Dole mechanism to 
nonexclusively license intellectual property to multiple small 
businesses, ensuring that the commercial potential of the federally-
funded research is not lost.
    In addition to pre-existing small businesses, Bayh-Dole provides 
impetus for the creation of small companies based on university-owned 
intellectual property. In my experience, such spinouts are either based 
on university-owned inventions previously created using federal funding 
(and are therefore direct beneficiaries of Bayh-Dole), or are created 
with the willing participation of industry sponsors of the research. In 
the latter case, the originally-sponsoring industrial concern will 
typically accept an equity stake in the new small business, usually in 
return for an initial investment. It is typical that the new company's 
intellectual property relies on background intellectual property held 
by the university and created with federal funding. The Bayh-Dole act 
allows this important background property to be both protected as well 
as licensed to the new concern.
    Finally, Small Business Innovative Research (SBIR) grants and 
analogous directed federal funding are an essential resource for the 
creation and support of small businesses. Often, for the 
infrastructure, expertise, or other reasons cited above, small 
businesses will partner with universities in the performance of these 
grants. Bayh-Dole acts as a `regularizer' allowing straightforward 
negotiation between federally-funded small businesses and universities 
while simultaneously preserving the abilities of both parties to 
protect the produced intellectual property essential for future company 
growth.

Best Practices

Q6.  During the hearing, the witnesses discussed a number of best 
practices which improved university-industry collaboration on industry 
sponsored research. Please summarize, in priority order, your top 
recommendations to improve collaboration on industry sponsored 
research.

A6. The relationship between universities and industries is best 
facilitated by recognition and understanding of the respective 
missions, needs, and intents of both parties. Universities exist to 
create and transfer knowledge through their educational and research 
programs. Companies focus on improving products and processes in order 
to enhance shareholder value. In many cases these interests are aligned 
and synergistic. Both parties serve the public best when new products, 
services, cures for diseases are made available to the public and that 
often leads to profitable business and economic growth. In the area of 
human resources, universities provide an educated workforce and leaders 
in science, technology and business while the private sector creates 
jobs and opportunities for those highly skilled workers. Research needs 
and technology transfer practices may vary from discipline to 
discipline and among industry sectors. A best practice exists when 
these differences in mission and role in society are recognized and 
valued in the university research relationship.
    Practices that enhance understanding and improve the research 
relationship between universities and industries have been documented 
several times. Most recently, the Council on Governmental Relations 
published a brochure, University Industry Research Relationships, which 
is available from that organization and discusses the context and 
models for collaboration. The National Academies of Sciences convened, 
under the auspices of the Government University Research Roundtable, a 
group of companies and universities to examine the research 
relationship between academia and industry. This group formed the 
University-Industry Demonstration Partnership (UIDP) the purpose of 
which is to nourish and expand collaborative partnerships between 
university and industry in the United States. After much discussion 
about the missions, values and constraints of both parties, the UIDP 
published a document entitled Guiding Principles for University-
Industry Endeavors. That document is available on their website at 
http://www7.nationalacademies.org/guirr/
Guiding-Principles.pdf. Best practices might be summed up in 
terms of finding common ground and alignment of interests. As COGR 
states in University Industry Research Relationships, ``many successful 
relationships between universities and industry have been implemented 
and many involve the parties reaching compromises regarding 
intellectual property that satisfy the requirements of both parties.''

Federal Government Oversight

Q7.  The Federal Government has an important oversight function for 
Bayh-Dole to insure that university patenting serves its intended 
purpose and is not misused. What specific oversight do you recommend, 
including oversight by individual agencies funding federal research at 
universities?

A7. It is my understanding that the oversight focal point for Bayh-Dole 
has been shifted within the Department of Commerce to the National 
Institute of Standards and Technology. I believe the Department of 
Commerce should re-elevate the oversight function to the Secretary's 
level or other high-level position to insure the necessary attention to 
oversight within the Department and a high profile for the Bayh-Dole 
issues within the business and university communities.

                              Appendix 2:

                              ----------                              


                   Additional Material for the Record



          Statement of the Biotechnology Industry Organization

Summary

    The Biotechnology Industry Organization (BIO) appreciates this 
opportunity to provide the perspective of its members on the Bayh-Dole 
Act. BIO represents over 1,100 companies, universities and research 
institutions using biotechnology to research and develop cutting edge 
health care, agricultural, industrial and environmental products and 
applications.
    The biotechnology industry is one of the most R&D-intensive and 
capital-focused industries in the world. The industry is primarily made 
up of small companies that are unprofitable and that lose billions of 
dollars annually. 'bet it holds the promise for a cutting edge cure for 
Alzheimer's, drought resistant crops, or the next alternative energy 
source. With over 1,400 companies, many of which spun out of university 
research, the U.S. leads the world in biotechnology R&D. In 2005, the 
U.S. biotech industry spent $20 billion on research and development, 
and since its inception roughly two decades ago, has put into the hands 
of the public more than 300 biotech products, including lifesaving and 
life-enhancing health care treatments, and hundreds of diagnostic 
tests. The industry has already developed dozens of insect-resistant 
crops and environmentally friendly industrial applications.
    All of this accomplishment has occurred despite the decades-long 
development time, massive investment needs, and complex regulatory 
process the industry must face before bringing its products and 
applications to market. The Milken Institute, in a 2006 report entitled 
``Mind-to-Market: A Global Analysis of University Biotechnology 
Technology Transfer and Commercialization,''[i] identified five key 
factors that contribute to the successful commercialization of 
university biotechnology research: a consistent and transparent 
national innovation policy that recognizes intellectual property 
protection and promotes entrepreneurial capitalism; the availability of 
funding and venture capital; biotechnology clusters not restricted by 
geographic borders; robust university technology transfer mechanisms; 
and patents and licensing.
    The U.S. system of commercializing scientific discoveries has made 
it the world leader in the area of biotechnology in large measure 
because it takes into account the factors identified by the Milken 
Report. However, this was not always the case. Indeed, rapid 
commercialization of scientific discovery did not fully come about 
until the enactment of the Bayh-Dole Act in 1980. Prior to enactment of 
this legislation, publicly-funded research was owned by the government 
and offered for licensing on a non-exclusive basis or simply dedicated 
to the public. There was little incentive for businesses to undertake 
the financial risk to develop a product. The result was that only five 
percent of publicly-funded discoveries were ever developed into new or 
improved products.[ii] The Bayh-Dole Act allowed universities and 
research institutions to patent and retain title to their inventions. 
Moreover, the Act allowed for flexibility in licensing of publicly-
funded inventions without excessive government intervention. The 
motivation to license the technology in expectation of royalty payments 
was created. This provided a necessary impetus for the transfer of 
publicly-sponsored research to the private sector, thereby dramatically 
stimulating the commercialization of Federal Government-supported 
research. The result, among other things, is the existence of 
innovative new therapeutics, diagnostics and tools, industrial 
processes and agricultural products for the benefit of society.
    From the perspective of the biotechnology industry, over the past 
25 years the Bayh-Dole Act has accomplished more than its goal of 
turning publicly-fielded research into useful, commercial products. It 
has also served as a basic tool for economic development and job 
creation in the United States. In its policy statement on July 24, 
2007, the National Governors Association recognized the import of Bayh-
Dole and university technology transfer as catalysts for innovation and 
R&D.
    The Bayh-Dole Act has become a template for innovation and economic 
development for other enterprising countries such as India and China. 
The Milken report shows that, while universities in the United States 
have clearly set the standard in commercializing research, other 
countries, particularly in Europe and Asia, have recognized the role of 
universities in spurring the biotechnology industry. The study suggests 
that, in order for the U.S. to maintain its leadership in innovation, 
it must continue to field research and university technology transfer 
offices, encourage the transfer of innovative research to the private 
sector, and ensure strong intellectual property (IP) protection.
    BIO applauds this committee's oversight of this critically 
important Act to ensure that the next 25 years of Bayh-Dole provide 
even greater benefit to the American public and the world community. In 
its oversight capacity, this Committee should carefully consider how 
pioneering policies like the Bayh-Dole Act have helped to create the 
biotechnology industry and U.S. leadership in this area, as well as the 
broader economic and societal benefits from the Act.

The Role of Patents in Biotechnology

    In BIO's view, efficient technology transfer is intricately linked 
to strong IP protections and free market incentives. In the context of 
the Bayh-Dole Act, patents serve as the legal instrument used in the 
transfer of technology, information and know-how. Commercializing an 
invention in the biotech sector is a lengthy process requiring 
significant amounts of capital, often in the hundreds of millions of 
dollars. While government funding and research is critical in biotech 
R&D, substantial additional financing from the public and private 
capital markets is required to actually take the product from the idea 
stage to one that can be used by the public. Let's take as an example a 
typical health care-related biotech discovery. A researcher, typically 
in a publicly-funded laboratory, discovers a gene whose presence is 
only found in a particular type of cancer. The researcher also 
determines that the presence of this gene signals the presence of a 
quantifiable amount of a particular protein. Translating this initial 
discovery into a therapeutic application can take decades and hundreds 
of millions of dollars. However, it is at this early stage when the 
promise of a therapy is on the horizon that the researcher can seek 
patent protection on the various aspects of the discovery. By way of a 
patent, the researcher can generate interest in the further development 
of this potential new product by, for example, out-licensing the 
invention, or forming a spin-off company focusing on the R&D of this 
early-stage discovery. In both cases, the patent is the asset that 
creates a forward trajectory for the project. In the former case, an 
interested company partner would, among other things, review the 
strength and scope of the EP protecting the early-stage discovery to 
determine the worth of the investment. In the latter case, the IP 
generates the interest of institutional investors, venture capitalists, 
or other partners encouraging the creation of an early-stage company. 
In any event, the early-stage, publicly-funded discovery is now on its 
way to development. Of course the road to development from this point 
is long and torturous, and often fraught with set backs, but the 
transfer of technology is complete and the wheels are set in motion.
    From this point on, patents play a significant role in investment 
of capital in the biotechnology markets. Investors measure 
opportunities in the biopharmaceutical and pharmaceutical sector 
through potential sales of the drug/product, the market exclusivity 
prospect through patent protection, other forms of marketing 
exclusivity (such as orphan drug exclusivity), or other means to gauge 
the strength and predictability of patent protection.
    The ancillary benefits of this ecosystem to the economy in the form 
of jobs, tax revenue and new companies should not be overlooked. 
According. to the Association for University Technology Managers' 
(AUTM) annual report[iii], the Bayh-Dole Act continues to create 
hundreds of companies and tens of thousands of new jobs annually. 
Virtually every state has a biotechnology center or initiative.
    If the major policy objective of the Bayh-Dole Act is to use the 
patent system to promote the commercialization and utilization of 
inventions arising from federally-supported research or development, 
then the biotechnology sector is an exemplary measure of its success. 
The Bayh-Dole Act provides the environment for biotechnology companies 
to take the risk of investing in biotechnology R&D. It provides the 
lure of market exclusivity as the incentive for companies to work 'in 
cooperation with public institutions. There is little misunderstanding 
of the primary obligation that companies have under Bayh-Dole to 
commercialize the licensed technology. This point is solidified by the 
statute's provision that failure to commercialize a licensed federally-
funded invention can be the basis for government march-in rights.
    While BIO believes that the Bayh-Dole Act is working quite well, 
there are ways to ensure that maximum benefit is continually derived 
from its provisions. As an example, BIO urges that the patent system 
should be kept strong and predictable. Congress is currently 
considering patent reform legislation that, iii its current form, could 
negatively impact commercialization of publicly-funded research by 
undermining the strength, value, and predictability of patent 
protection. This would, in turn, make it much less likely that 
companies and venture capital companies would invest in risky, cutting-
edge research, resulting in publicly-funded research sitting on 
laboratory shelves. BIO recently testified before the Senate Judiciary 
Committee about its views on patent reform, and the university 
technology transfer community has weighed in with similar concerns.[iv]
    In addition, consistent and transparent implementation of the Bayh-
Dole Act, together with a cataloguing of ``best practices'' and 
successful partnerships, would provide more efficient transfer of 
technology. Congress should consider funding studies that would aid in 
the identification and compilation of such best practices and identify 
how best to support the technology transfer offices in their overall 
mission.
    In this spirit, BIO cautions against policies that would weaken 
market incentives through excessive government intervention. We can 
point to lessons learned in the 1990s in studying the Bayh-Dole Act. 
Concerns that health care reform proposals from the early 1990s could 
lead to price controls led to serious perturbations in the market for 
biotechnology investment. The impact of potential price controls on the 
biotechnology industry was immediate and powerful. The capital markets 
crashed and investment in biotech research nearly dried up.
    A similar result occurred in 1999 when President Clinton and Prime 
Minister Blair were cited in the press as supporting the notion that 
certain classes of patented genetic information should be freely 
available to all at the time the human genome was ``unraveled.'' 
Despite a clear correction by the President the next day, it took six 
months for the biotechnology capital markets to recover.
    In both cases, a threat to free-market protection and undermining 
intellectual property rights drove investors away froth biotechnology 
research. The Bayh-Dole Act was designed to facilitate the transfer of 
publicly-funded research to the private sector for further development 
and commercialization. The careful balance set forth in the Act has 
been hugely successful. We have learned from history that excessive 
government intervention can disincentivize biotechnology companies from 
undertaking the huge risks to bring innovative products and services to 
all Americans.

Conclusion

    The legislative framework of the Bayh-Dole Act has worked well over 
these 25 years. The House Committee on Science and Technology is to be 
commended for undertaking this examination of the Bayh-Dole Act. BIO 
appreciates the opportunity to provide insight into the impact of Bayh-
Dole on the biotech industry and to describe the nature of the industry 
and its contributions to the improvement of the human condition. BIO's 
members are strong supporters of the Bayh-Dole Act, which has opened 
the door to the creation of many biotechnology companies that have 
developed important advances and cutting-edge solutions to some of the 
world's most intractable problems. We caution against policies that 
would weaken market incentives through excessive government 
intervention. We urge Congress to continue its far-sighted approach to 
innovation as it continues oversight of the effective implementation of 
the Bayh-Dole Act.

Endnotes

i      Mind to Market Study. http://www.milkeninstitute.org/
publications/publications.taf?function=detail&ID=576&cat=ResRep

ii    Association for University Technology Managers, Annual Report, 
2003

iii    Association for University Technology Managers, Annual Report, 
2005

iv    BIO's patent reform statement. http://bio.org/ip/domestic/
20070606.asp

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