[Congressional Record Volume 145, Number 67 (Tuesday, May 11, 1999)]
[Senate]
[Pages S5041-S5043]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 999. A bill to amend chapter 18 of title 35, United States Code, 
to improve the ability of Federal agencies to patent and license 
federally owned inventions, and for other purposes; to the Committee on 
the Judiciary.


                    technology transfer act of 1999

  Mr. HATCH. Mr. President, I rise to introduce S. 999, the 
``Technology Transfer Act of 1999.''
  The purpose of this bill is to help ensure that the fruits of 
federally conducted and supported research will be translated into new 
products and jobs that can benefit the American public.
  This bill is necessary in order to adopt a uniform policy across the 
federal government concerning the circumstances in which it is 
appropriate to grant an exclusive or partially exclusive license to 
intellectual property owned by the federal government. Essentially, 
this legislation codifies the most prudent, beneficial, and successful 
agency licensing policies that have evolved over the last few years.
  Each year the federal government makes a substantial investment in 
research and development. This year the federal government will 
dedicate about $79 billion toward research and development activities. 
Of this amount, about half--or $39 billion--is devoted to non-defense 
research. Much of this civilian R&D funding--over $15 billion in FY 
1999--is carried out by universities across our country.
  Every American citizen should take pride in this considerable 
financial commitment because it explains why our country is in the 
forefront in so many areas of basic science and applied technology.
  While there is intrinsic value in research for the sake of 
advancement of knowledge, another, more tangible, benefit occurs when 
the mysteries of science are translated into new technologies that 
protect and promote the public health and welfare and create jobs.
  While Utah may be a small state in terms of population, I am proud to 
say that our universities are carrying out a vigorous program of 
research. For example, the University of Utah, Brigham Young 
University, and Utah State University each carry out substantial 
programs of research and in the aggregate received over $200 million in 
federal research support in 1998.
  Last year the research efforts of these three schools resulted in the 
issuance of patents on 40 inventions.
  No doubt this high level of financial support and creative activity 
are major reasons why our state has developed a thriving medical 
products industry over the last two decades.
  According to a recent survey of the Utah Life Science Association 
there are currently 116 firms--employing a total of over 11,000 
people--engaged in the discovery and production of biomedical products 
in the state of Utah. Together, these firms produced revenues of $1.641 
billion last year.
  Not only does this economic enterprise mean jobs for Utahns but also 
innovative new products for Americans and our neighbors around the 
world.
  To give just one example, researchers at the University of Utah were 
co-discoverers of the BRCA 1 gene which is implicated in certain kinds 
of breast cancer. A start-up Salt Lake City biomedical research firm, 
Myriad Genetics, was also a partner in this ground breaking research, 
as were intramural researchers at the National Institutes of Health. 
Building upon this basic research, academic researchers at the Huntsman 
Cancer Center at the University of Utah and private sector scientists 
at Myriad are playing a lead role in developing diagnostic tests and 
therapeutics which are aimed at combating the devastation of breast 
cancer.
  The success we have achieved in institutions of higher learning in 
Utah is also occurring across our Nation.
  According to the latest data available from the Association of 
University Technology Managers (AUTM), in 1997, the efforts of U.S. 
universities, academic health centers, and certain other non-profit 
research entities resulted in over 11,000 invention disclosures, over 
4,200 new patent applications being filed, and over 2,600 issued 
patents.
  Also according to AUTM, in 1997, over 3,300 new licenses were 
executed and total licensing income reached nearly $700 million. An 
economic model developed by AUTM estimates that about 250,000 jobs are 
attributable to commercializing academic research.
  Government labs have also contributed to this success story. For 
example, in FY 1998 the National Institutes of Health (NIH) received 
nearly $40 million in royalty income. Also in 1998, NIH intramural labs 
reported 287 invention disclosures; filed 132 patent applications; were 
granted 171 patents; and, executed 215 licenses and 149 cooperative 
research and development agreements.

  In sharp contrast to the vibrant research and technology 
commercialization activities that are taking place in Utah and across 
our country today, the situation twenty years ago was vastly different. 
According to a 1978 survey, the federal government owned 78,000 patents 
but only 5 percent were ever licensed.
  Research and development is expensive, but it has been estimated that 
R&D accounts for only about 25% of the cost of bringing a new product 
to the market. Without adequate protection of intellectual property, it 
is simply not prudent for the private sector to invest in new 
technologies.
  In response to the problem of federally supported science languishing 
in the laboratory, the Congress passed a portfolio of legislation in 
the 1980s.
  The purpose of these measures was simple: to provide incentives in 
the intellectual property laws to help assure that federally-conducted 
and -supported research would be commercially developed so that the 
seeds of new ideas will be translated into the fruits of new products 
that can benefit the American public.
  My bill, S. 999, shares this goal and builds upon the previous 
intellectual property legislation in this area.
  The ``Patent and Trademark Act Amendments of 1980'' (Public Law 96-
517) is commonly termed the Bayh-Dole Act out of the well-earned 
respect for its two far-sighted cosponsors, Senator Birch Bayh and 
Senator Bob Dole.
  The Bayh-Dole Act created a uniform patent policy among the many 
federal agencies that fund research and increased incentives for 
universities to engage in government-supported research. Under the act, 
small businesses and nonprofit organizations, including universities, 
were permitted to retain ownership of patents stemming from federal 
funds. In turn, patent holders could grant licenses to companies to 
further develop and commercialize the patented invention.
  In 1986, Congress enacted the ``Federal Technology Transfer Act'' 
(Public Law 99-502). This law established new patenting, licensing and 
partnering policies for government laboratories. In concert with the 
philosophy of the

[[Page S5042]]

Bayh-Dole Act, the FTTA contemplates an activist role for government 
laboratories in assisting in the journey from the laboratory to the 
market place. The FTTA amended the earlier ``Stevenson-Wydler 
Technology Innovation Act of 1980'' (Public Law 96-480), which proved 
insufficient to meet its intended charge of making transfer of federal 
technology a duty of all federal laboratories. In addition to mandating 
a federal role in the technology transfer arena by strengthening the 
intellectual property laws in the areas of patenting and licensing, the 
FTTA created and embraced a unique device--the Cooperative Research and 
Development Agreement (CRADA)--which encourages a government/private 
sector partnership in the earliest stages of research.
  In devising S. 999, I have worked closely with several colleagues, 
most prominently Representative Connie Morella, Chairman of the 
Subcommittee on Technology of the House Committee on Science. Chairman 
Morella, whose district is the home of the National Institutes of 
Health, has long been a leader in the area of technology policy. 
Chairman Morella and Representative George Brown, the thoughtful 
ranking member of the full Committee have often worked together in a 
bipartisan manner in this area and are cosponsors of H.R. 209, the 
House companion to S. 999.
  In this Chamber, Senator Rockefeller has a long and distinguished 
record in the area of technology policy. Together with Senator Frist, 
Senator Rockefeller introduced similar legislation last Congress and 
once again this year.
  I am working with all of these Members, as well as with Senator 
McCain, Chairman of the Commerce, Science, and Transportation 
Committee, and the Senate and House leadership to secure passage of 
this important legislation. Working together, I believe that we have 
succeeded in building upon as well as correcting some problems 
identified with the legislative proposals made last Congress, S. 2120 
and H.R. 2544.
  S. 999 amends the patent code to make explicit when federal agencies 
should, and should not, grant exclusive licenses to its patented 
inventions.
  The bill permits an exclusive or partially exclusive license only if 
such a license is reasonable and necessary to attract the necessary 
private sector investment capital or otherwise promote the invention's 
utilization. The bill requires the agency to evaluate a potential 
licensee's development plans and level of capacity and commitment so 
that only the level of necessary exclusivity is granted. Once a license 
agreement is executed the bill requires a rigorous periodic evaluation 
of progress under the agreement and allows the government to terminate 
a license for non-performance of the terms of the license.
  The bill also requires that in granting patent licenses the 
government take into account possible effects on competition including 
any potential antitrust concerns. In the case of licensing inventions 
covered by foreign patents, the government is directed to consider the 
possible U.S. interest in foreign trade and commerce.
  In addition, the bill contains a domestic manufacturing requirement 
that is designed to keep jobs created through newly patented 
technologies in the United States. As well, the legislation contains a 
preference for issuing licenses to small businesses--the sector of the 
economy where most new jobs are created.
  Under the bill, the government would retain a nontransferable, 
irrevocable, paid-up license to practice the invention on behalf of the 
United States Government in the unlikely event this need should arise.
  Before any exclusive or partially exclusive license may be granted 
under the authority of the patent code, the agency, except in cases of 
inventions made under an existing CRADA, must give at least 15 days 
public notice and consider any comments that are submitted.
  The bill treats any confidential commercial information as part of an 
application or periodic performance report under normal Freedom of 
Information Act principles.
  Mr. President, the ``Technology Transfer Act of 1999'' builds upon 
earlier legislation in this critical area. I am honored to be following 
in the footsteps of our former Majority Leader, Senator Dole, and the 
former Member of the Judiciary Committee, Senator Birch Bayh--father of 
the new member of the Senate from Indiana.
  I am also pleased to follow in the footsteps of my predecessors on 
the Judiciary Committee, which was the locus of activity for the 
seminal 1980 legislation that amended the patent code and changed our 
nation's patent licensing policies.
  I urge all of my colleagues to support S. 999.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 999

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Technology Transfer Act of 
     1999''.

     SEC. 2. LICENSING FEDERALLY OWNED OR PATENTED INVENTIONS.

       (a) In General.--Section 209 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 209. Licensing federally patented or owned inventions

       ``(a) Authority.--A Federal agency may grant an exclusive 
     or partially exclusive license on a federally owned invention 
     under section 207(a)(2) only if--
       ``(1) granting the license is a reasonable and necessary 
     incentive to--
       ``(A) call forth the investment capital and expenditures 
     needed to bring the invention to practical application; or
       ``(B) otherwise promote the invention's utilization by the 
     public;
       ``(2) the Federal agency finds that the public will be 
     served by the granting of the license, as indicated by the 
     applicant's intentions, plans, and ability to bring the 
     invention to practical application or otherwise promote the 
     invention's utilization by the public, and that the proposed 
     scope of exclusivity is not greater than reasonably necessary 
     to provide the incentive for bringing the invention to 
     practical utilization, as proposed by the applicant, or 
     otherwise to promote the invention's utilization by the 
     public;
       ``(3) the applicant makes a commitment to achieve practical 
     utilization of the invention within a reasonable time, which 
     time may be extended by the agency upon the applicant's 
     request and the applicant's demonstration that the refusal of 
     such extension would be unreasonable;
       ``(4) granting the license will not tend to substantially 
     lessen competition or create or maintain a violation of the 
     Federal antitrust laws; and
       ``(5) in the case of an invention covered by a foreign 
     patent application or patent, the interests of the Federal 
     Government or United States industry in foreign commerce will 
     be enhanced.
       ``(b) Manufacture in United States.--A Federal agency shall 
     normally grant a license under section 207(a)(2) to use or 
     sell any federally owned invention in the United States only 
     to a licensee who agrees that any products embodying the 
     invention or produced through the use of the invention will 
     be manufactured substantially in the United States.
       ``(c) Small Business.--First preference for the granting of 
     any exclusive or partially exclusive licenses under section 
     207(a)(2) shall be given to small business firms having equal 
     or greater likelihood as other applicants to bring the 
     invention to practical application within a reasonable time.
       ``(d) Terms and Conditions.--Any licenses granted under 
     section 207(a)(2) shall contain such terms and conditions as 
     the granting agency considers appropriate. Such terms and 
     conditions shall include provisions--
       ``(1) retaining a nontransferable, irrevocable, paid-up 
     license for any Federal agency to practice the invention or 
     have the invention practiced throughout the world by or on 
     behalf of the Government of the United States;
       ``(2) requiring periodic reporting on utilization of the 
     invention, and utilization efforts, by the licensee, but only 
     to the extent necessary to enable the Federal agency to 
     determine whether the terms of the license are being complied 
     with; and
       ``(3) empowering the Federal agency to terminate the 
     license in whole or in part if the agency determines that--
       ``(A) the licensee is not executing its commitment to 
     achieve practical utilization of the invention, including 
     commitments contained in any plan submitted in support of its 
     request for a license, and the licensee cannot otherwise 
     demonstrate to the satisfaction of the Federal agency that it 
     has taken, or can be expected to take within a reasonable 
     time, effective steps to achieve practical utilization of the 
     invention;
       ``(B) the licensee is in breach of an agreement described 
     in subsection (b);
       ``(C) termination is necessary to meet requirements for 
     public use specified by Federal regulations issued after the 
     date of the license, and such requirements are not reasonably 
     satisfied by the licensee; or

[[Page S5043]]

       ``(D) the licensee has been found by a court of competent 
     jurisdiction to have violated the Federal antitrust laws in 
     connection with its performance under the license agreement.
       ``(e) Treatment of Report Information.--Any report required 
     under subsection (d)(2) shall be treated by the Federal 
     agency as commercial and financial information obtained from 
     a person and is privileged and confidential and not subject 
     to disclosure under section 552 of title 5.
       ``(f) Public Notice.--No exclusive or partially exclusive 
     license may be granted under section 207(a)(2) unless public 
     notice of the intention to grant an exclusive or partially 
     exclusive license on a federally owned invention has been 
     provided in an appropriate manner at least 15 days before the 
     license is granted, and the Federal agency has considered all 
     comments received before the end of the comment period in 
     response to that public notice. This subsection shall not 
     apply to the licensing of inventions made under a cooperative 
     research and development agreement entered into under section 
     12 of the Stevenson-Wydler Technology Innovation Act of 1980 
     (15 U.S.C. 3710a).
       ``(g) Plan.--No Federal agency shall grant any license 
     under a patent or patent application on a federally owned 
     invention unless the person requesting the license has 
     supplied the agency with a plan for development or marketing 
     of the invention, except that any such plan shall be treated 
     by the Federal agency as commercial and financial information 
     obtained from a person and privileged and confidential and 
     not subject to disclosure under section 552 of title 5.''.
       (b) Amendments to Chapter 18 of Title 35, United States 
     Code.--Chapter 18 of title 35, United States Code, is 
     amended--
       (1) in section 200 by inserting ``without unduly 
     encumbering future research and discovery'' after ``free 
     competition and enterprise;'';
       (2) by amending section 202(e) to read as follows:
       ``(e) In any case when a Federal employee is a coinventor 
     of any invention made with a nonprofit organization, small 
     business firm, or a non-Federal inventor, the Federal agency 
     employing such coinventor may, for the purpose of 
     consolidating rights in the invention and if it finds that it 
     would expedite the development of the invention--
       ``(1) license or assign whatever rights it may acquire in 
     the subject invention to the nonprofit organization, small 
     business firm, or non-Federal inventor in accordance with 
     sections 200 through 204 (including this section); or
       ``(2) acquire any rights in the subject invention from the 
     nonprofit organization, small business firm, or non-Federal 
     inventor, but only to the extent the party from whom the 
     rights are acquired voluntarily enters into the transaction 
     and no other transaction under this chapter is conditioned on 
     such acquisition.''; and
       (3) in section 207(a)--
       (A) in paragraph (2), by striking ``patent applications, 
     patents, or other forms of protection obtained'' and 
     inserting ``inventions''; and
       (B) in paragraph (3), by inserting ``, including acquiring 
     rights for and administering royalties to the Federal 
     Government in any invention, but only to the extent the party 
     from whom the rights are acquired voluntarily enters into the 
     transaction, to facilitate the licensing of a federally owned 
     invention'' after ``or through contract''.
       (c) Conforming Amendment.--The item relating to section 209 
     in the table of sections for chapter 18 of title 35, United 
     States Code, is amended to read as follows:

``209. Licensing federally patented or owned inventions.''.
                                 ______