[Congressional Record Volume 147, Number 119 (Thursday, September 13, 2001)]
[Senate]
[Pages S9406-S9409]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 SMALL BUSINESS TECHNOLOGY TRANSFER PROGRAM REAUTHORIZATION ACT OF 2001

  Mr. REID. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 142, S. 856.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (S. 856) to reauthorize the Small Business 
     Technology Transfer Program, and for other purposes.

  There being no objection, the Senate proceeded to consider the bill.


                           Amendment No. 1569

  Mr. REID. Mr. President, I understand Senators Kerry and Bond have a 
substitute amendment at the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from Nevada [Mr. REID], for Mr. Kerry, for 
     himself and Mr. Bond, proposes an amendment numbered 1569.

  The amendment is as follows:

            (Purpose: To provide for a complete substitute)

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Technology 
     Transfer Program Reauthorization Act of 2001''.

     SEC. 2. EXTENSION OF PROGRAM AND EXPENDITURE AMOUNTS.

       (a) In General.--Section 9(n)(1) of the Small Business Act 
     (15 U.S.C. 638(n)(1)) is amended to read as follows:
       ``(1) Required expenditure amounts.--
       ``(A) In general.--With respect to each fiscal year through 
     fiscal year 2009, each Federal agency that has an extramural 
     budget for research, or research and development, in excess 
     of $1,000,000,000 for that fiscal year, shall expend with 
     small business concerns not less than the percentage of that 
     extramural budget specified in subparagraph (B), specifically 
     in connection with STTR programs that meet the requirements 
     of this section and any policy directives and regulations 
     issued under this section.
       ``(B) Expenditure amounts.--The percentage of the 
     extramural budget required to be expended by an agency in 
     accordance with subparagraph (A) shall be--
       ``(i) 0.15 percent for each fiscal year through fiscal year 
     2003; and
       ``(ii) 0.3 percent for fiscal year 2004 and each fiscal 
     year thereafter.''.
       (b) Conforming Amendment.--Section 9 of the Small Business 
     Act (15 U.S.C. 638) is amended in subsections (b)(4) and 
     (e)(6), by striking ``pilot'' each place it appears.

     SEC. 3. INCREASE IN AUTHORIZED PHASE II AWARDS.

       (a) In General.--Section 9(p)(2)(B)(ix) of the Small 
     Business Act (15 U.S.C. 638(p)(2)(B)(ix)) is amended--
       (1) by striking ``$500,000'' and inserting ``$750,000''; 
     and
       (2) by inserting before the semicolon at the end the 
     following: ``, and shorter or longer periods of time to be 
     approved at the discretion of the awarding agency where 
     appropriate for a particular project''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective beginning in fiscal year 2004.

     SEC. 4. AGENCY OUTREACH.

       Section 9(o) of the Small Business Act (15 U.S.C. 638(o)) 
     is amended--
       (1) in paragraph (12), by striking ``and'' at the end;
       (2) in paragraph (13), by striking the period at the end 
     and inserting a semicolon; and
       (3) by adding at the end the following:
       ``(14) implement an outreach program to research 
     institutions and small business concerns for the purpose of 
     enhancing its STTR program, in conjunction with any such 
     outreach done for purposes of the SBIR program; and''.

     SEC. 5. POLICY DIRECTIVE MODIFICATIONS.

       Section 9(p) of the Small Business Act (15 U.S.C. 638(p)) 
     is amended by adding at the end the following:
       ``(3) Modifications.--Not later than 120 days after the 
     date of enactment of this paragraph, the Administrator shall 
     modify the policy directive issued pursuant to this 
     subsection to clarify that the rights provided for under 
     paragraph (2)(B)(v) apply to all Federal funding awards under 
     this section, including the first phase (as described in 
     subsection (e)(6)(A)), the second phase (as described in 
     subsection (e)(6)(B)), and the third phase (as described in 
     subsection (e)(6)(C)).''.

     SEC. 6. STTR PROGRAM DATA COLLECTION.

       (a) In General.--Section 9(o) of the Small Business Act (15 
     U.S.C. 638(o)), as amended by this Act, is amended by adding 
     at the end the following:
       ``(15) collect, and maintain in a common format in 
     accordance with subsection (v), such information from 
     awardees as is necessary to assess the STTR program, 
     including information necessary to maintain the database 
     described in subsection (k).''.
       (b) Database.--Section 9(k) of the Small Business Act (15 
     U.S.C. 638(k)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``or STTR'' after ``SBIR'' each place it 
     appears;
       (B) in subparagraph (C), by striking ``and'' at the end;
       (C) in subparagraph (D), by striking the period at the end 
     and inserting ``; and''; and
       (D) by adding at the end the following:

[[Page S9407]]

       ``(E) with respect to assistance under the STTR program 
     only--
       ``(i) whether the small business concern or the research 
     institution initiated their collaboration on each assisted 
     STTR project;
       ``(ii) whether the small business concern or the research 
     institution originated any technology relating to the 
     assisted STTR project;
       ``(iii) the length of time it took to negotiate any 
     licensing agreement between the small business concern and 
     the research institution under each assisted STTR project; 
     and
       ``(iv) how the proceeds from commercialization, marketing, 
     or sale of technology resulting from each assisted STTR 
     project were allocated (by percentage) between the small 
     business concern and the research institution.''; and
       (2) in paragraph (2)--
       (A) by inserting ``or an STTR program pursuant to 
     subsection (n)(1)'' after ``(f)(1)'';
       (B) by striking ``solely for SBIR'' and inserting 
     ``exclusively for SBIR and STTR'';
       (C) in subparagraph (A)(iii), by inserting ``and STTR'' 
     after ``SBIR''; and
       (D) in subparagraph (D), by inserting ``or STTR'' after 
     ``SBIR''.
       (c) Simplified Reporting Requirements.--Section 9(v) of the 
     Small Business Act (15 U.S.C. 638(v)) is amended by inserting 
     ``or STTR'' after ``SBIR'' each place it appears.
       (d) Reports to Congress.--Section 9(b)(7) of the Small 
     Business Act (15 U.S.C. 638(b)(7)) is amended by striking 
     ``and (o)(9),'' and inserting ``, (o)(9), and (o)(15), the 
     number of proposals received from, and the number and total 
     amount of awards to, HUBZone small business concerns under 
     each of the SBIR and STTR programs,''.

     SEC. 7. STTR PROGRAM-WIDE MODEL AGREEMENT FOR INTELLECTUAL 
                   PROPERTY RIGHTS.

       (a) Development of Model Agreement.--Section 9 of the Small 
     Business Act (15 U.S.C. 638) is amended by adding at the end 
     the following:
       ``(w) STTR Model Agreement for Intellectual Property 
     Rights.--
       ``(1) In general.--The Administrator shall promulgate 
     regulations establishing a single model agreement for use in 
     the STTR program that allocates between small business 
     concerns and research institutions intellectual property 
     rights and rights, if any, to carry out follow-on research, 
     development, or commercialization.
       ``(2) Opportunity for comment.--In promulgating regulations 
     under paragraph (1), the Administrator shall provide to 
     affected agencies, small business concerns, research 
     institutions, and other interested parties the opportunity to 
     submit written comments.''.
       (b) Adoption of Model Agreement by Federal Agencies.--
     Section 9(o)(11) of the Small Business Act (15 U.S.C. 
     638(o)(11)) is amended by striking ``develop a model 
     agreement not later than July 31, 1993, to be approved by the 
     Administration,'' and inserting ``adopt the agreement 
     developed by the Administrator under subsection (w) as the 
     agency's model agreement''.

     SEC. 8. FAST PROGRAM ASSISTANCE TO WOMEN-OWNED AND MINORITY-
                   OWNED SMALL BUSINESS CONCERNS AND CONCERNS 
                   LOCATED IN AREAS NOT PARTICIPATING IN SBIR AND 
                   STTR.

       (a) Selection Consideration.--Section 34(c)(2)(B) of the 
     Small Business Act (15 U.S.C. 657d(c)(2)(B)) is amended--
       (1) in clause (iv), by striking ``and'' at the end;
       (2) in clause (v), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following new clause:
       ``(vi) whether the proposal addresses the needs of small 
     business concerns--

       ``(I) owned and controlled by women;
       ``(II) owned and controlled by minorities; and
       ``(III) located in areas that have historically not 
     participated in the SBIR and STTR programs.''.

       (b) Regulations.--Section 34(c)(4) of the Small Business 
     Act (15 U.S.C. 657d(c)(4)) is amended by adding at the end 
     the following: ``The Administrator shall promulgate 
     regulations establishing standards for the consideration of 
     proposals under paragraph (2), including standards regarding 
     each of the considerations identified in paragraph (2)(B).''.

  Mr. KERRY. Mr. President, today I rise to urge passage of S. 856, the 
Small Business Technology Transfer (STTR) Program Reauthorization Act 
of 2001. This legislation reauthorizes the Small Business 
Administration's highly successful Small Business Technology Transfer 
(STTR) Program for an additional eight years. Absent legislative action 
to reauthorize the Small Business Technology Transfer (STTR) program, 
it will expire on September 30, 2001.
  On July 19, 2001, the Committee on Small Business and 
Entrepreneurship (Committee) considered S. 856, the Small Business 
Technology Transfer (STTR) Program Reauthorization Act of 2001, 
unanimously reported the bill and recommended its passage. This 
legislation also makes changes to the STTR program to facilitate more 
effective collaboration between small businesses and research 
institutions.
  The STTR program funds research and development (R&D) projects 
performed jointly by small companies and research institutions as an 
incentive to advance the nation's technological progress and the 
government's research and development goals. It complements the Small 
Business Innovation Research (SBIR) program, which was reauthorized 
last year. Whereas the SBIR program funds R&D projects at small 
companies, STTR funds cooperative R&D projects between a small company 
and a research institution, such as a university or a Federally funded 
R&D lab. Like SBIR R&D projects, STTR projects help participating 
agencies achieve their missions in the research and development arena. 
It was also designed to convert the billions of dollars invested in 
research and development at our nation's universities. Federal 
laboratories and non-profit research institutions into new commercial 
technologies.
  The STTR program was started as a pilot in 1992, and the first grants 
were made in 1994. The program was reauthorized in 1997 for four years. 
The program is not funded out of the Small Business Administration's 
(SBA) budget, but out of the extramural R&D budgets of Federal agencies 
or departments with extramural R&D budgets of $1 billion or more. Such 
agencies must award at least .15 percent of that money for STTR 
projects. Five agencies currently qualify: the Department of Defense 
(DoD); the National Institutes of Health (NIH); the National 
Aeronautics and Space Administration (NASA); the National Science 
Foundation (NSF); and the Department of Energy (DoE).
  There are three phases of the program. Phase I is a one-year grant 
for $100,000, and its purpose is to determine the scientific and 
commercial merits of an idea. Phase II is a two-year grant for 
$500,000, and its purpose is to further develop the idea. Phase III is 
used to pursue commercial applications of the idea and cannot be funded 
with STTR funds. Only private-sector and non-STTR Federal funds may be 
used in Phase III.
  At the Committee on Small Business and Entrepreneurship hearing on S. 
856 we heard from Dr. Anthony N. Pirri, Director of the Division of 
Technology Transfer at Northeastern University in Boston, Mass.; Mr. 
Clifford C. Hoyt, Vice President and Chief Technology Officer of 
Cambridge Research and Instrumentation in Woburn, Mass.; Dr. Barna 
Szabo, Founder and Chairman of Engineering Software Research and 
Development Inc. in St. Louis, Mo.; Mr. Kirk Ririe, President and CEO 
of Idaho Technology, Inc. in Salt Lake City, Utah; Mr. Maurice Swinton, 
Assistant Administrator for the Office of Technology at the Small 
Business Administration; and Mr. Jim Wells, Director of Natural 
Resources and Environment at the General Accounting Office.

  There was consensus that the program is meeting its objectives, 
should be continued, and the Phase II award amount should be increased. 
Examples were given of technological advances which improved 
industries, grew businesses, created jobs and more than returned the 
Federal government's investment. One comment, in particular, from Mr. 
Kirk Ririe of Idaho Technology Inc., which started modestly in a potato 
shed and now has locations in Idaho and Utah, demonstrates the power of 
the STTR program:

       We were a tiny company--six people working with the 
     university group. We were able to, within two years, launch 
     (with about $100,000 in funding) a product that basically 
     filled a hole in biotechnology research and development . . . 
     that has gone on to generate over $100 million in sales . . . 
     The GAO figures may not [reflect this, but] I guarantee that 
     we have paid a lot more money back to the government in taxes 
     than we received in any of the funding . . . The program has 
     been absolutely crucial to us. If we had not had this 
     program, we would still be in the potato shed . . .

  At the request of the Chairman and Ranking member of the Committee, 
GAO surveyed all companies which had received Phase II awards from 1995 
to 1997. GAO chose these years because they were the first years of the 
program and it generally takes three to nine years for a company to 
progress from basic research of a concept to commercialization of a 
developed product. Though this program is still relatively young, the 
survey results indicate it is working effectively. Of the 102 companies 
participating in the survey, 53.5 percent had either commercialized the 
technology or received follow-on funding for the technology.

[[Page S9408]]

These companies had approximately $132 million in sales and $53 million 
in additional funding. These STTR winners expect additional sales of 
more than $90 million dollars by 2005. Putting this into perspective, 
the Government's total awards to these companies were less than $60 
million, less than half of the sales to date and about five percent of 
the expected sales by 2005.
  While S. 856 as reported reauthorized the program for nine years, the 
Manager's amendment reduces this to eight years. This was done in order 
to reach consensus promptly and enable the bill to pass both houses--
before the expiration date of the program.
  In FY2004 and thereafter the bill increases from .15 to .3 percent of 
Federal extramural research and development funds going to this 
program. Recently the program was made $65 million annually for STTR 
awards. Based on that amount, increasing the percentage to .3 percent 
would make $130 million available annually for small business 
technology transfer. The Committee originally reported language that 
would have increased the percentage to .5 percent in 2007. In order to 
reach consensus, we agreed to delete the final incremental increase 
from the bill until we have more experience and information.

  The bill also raises the Phase II grant award amount from $500,000 to 
$750,000. This change was intended to address concerns by the small 
businesses and the research institutions that $500,000 typically is no 
longer enough for this stage of research and development. As Dr. Pirri 
of Northeastern said at the hearing, ``By expanding the STTR program, 
funding levels will become more adequate to take technologies through 
the prototype stage and increase their probability of commercial 
success.'' Raising Phase II STTR awards to $750,000 makes them 
consistent with the Small Business Innovation Research (SBIR) program's 
Phase II awards.
  GAO reported that only about 250 universities have participated in 
the program so far. The Committee believes, and GAO concurs, that there 
is tremendous potential to involve more universities in partnering with 
small businesses to convert research into new technologies. One of the 
goals of the STTR program is to create economic development around 
universities, Federal laboratories and non-profit research institutions 
across the country are attempting to duplicate the successful clusters 
similarly developed along Massachusetts' Route 128 and in California's 
Silicon Valley. In order to increase participation by a larger number 
of universities, S. 856 includes a provision encouraging the STTR 
agencies to reach out to universities to raise awareness of the program 
and to provide information to their faculty members.
  S. 856 also strengthens the data rights protection for companies and 
research institutions that conduct STTR projects. The change in data 
rights is important because it clarifies that STTR companies, like SBIR 
companies, retain the data rights to their technology through all 
phases of a STTR project. Unfortunately some agencies have been 
interpreting the law to mean that STTR companies only retain their data 
rights through Phases I and II.
  This clarification helps protect STTR companies from losing control 
of their research so that they have a greater chance of commercializing 
their technology themselves. This clarification is important because 
the Committee has learned some agencies are providing the data to 
bigger contractors for development, thereby cutting out the small 
business. This unfortunate situation not only robs small businesses of 
revenues, but it also results in expensive legal costs for small 
businesses to protect their data rights.
  As last year's legislation did for the SBIR program, this bill 
strengthens the data collection requirements regarding awards and the 
data rights for companies and research institutions that conduct STTR 
projects. The goal is to collect better information about the companies 
doing the projects, as well as the research and development, so we can 
measure success and track technologies. The Manager's amendment expands 
the reporting requirements to include reporting on HUBZones small 
businesses under the SBIR and STTR programs. The amendment also 
requires the SBA and the agencies to develop a model agreement for 
intellectual property rights. Finally, the Manager's amendment includes 
a provision that requires SBA, when considering proposals under the 
recently enacted Federal and State Technology Partnership Program 
(FAST), to consider whether the proposals address the needs of small 
business concerns: (I) owned and controlled by women; (II) owned and 
controlled by minorities; and (III) concerns located in areas that have 
historically not participated in the SBIR and STTR Programs.
  This bill will ensure that this successful program is continued and 
expanded. It will also provide Congress with important information and 
data on the program and encourage more outreach to small businesses and 
research institutions.
  Mr. President, I want to encourage my colleagues to learn about this 
program, to find out the benefits to their state's hi-tech small 
business, research universities and labs, and to join me in passing 
this legislation in the Senate. To my friend from Missouri, Senator 
Bond, I want to thank you and your staff for working with me and my 
staff to build this country's technological progress. I especially want 
to thank one member of Senator Bond's staff, David Bohley. Dave has 
worked tirelessly and effectively for the technology and small business 
community. He is leaving the Committee, and we will all miss working 
with him. I wish him well in his new job at the Federal National 
Mortgage Association (FNMA). I also want to thank all of the members of 
the Committee for their work on this legislation and for helping small 
business. All 19 members of the Committee voted for and supported this 
legislation.
  Mr. President, I urge the Senate to pass S. 856, as amended.
  Mr. BOND. Mr. President, I rise to lend my strong support to S. 856, 
the Small Business Technology Transfer Program Reauthorization Act of 
2001. The Committee on Small Business and Entrepreneurship has closely 
reviewed the STTR program this year and found the STTR program to be 
highly successful. This important bill acknowledges that success by 
expanding the program.
  This bill, like most bills considered by the Small Business and 
Entrepreneurship Committee, was crafted in a bipartisan manner and 
approved by a unanimous vote. I would like to thank Senator Kerry, and 
chairman of the committee, for his leadership and cooperation in this 
effort. I am pleased to have worked closely with him on this bill, and 
I trust our colleagues will overwhelmingly support this legislation.
  The STTR Program was created in 1992 to stimulate technology transfer 
from research institutions to small firms while, at the same time, 
accomplishing the Federal government's research and development goals. 
The program is designed to convert the billions of dollars invested in 
research and development at our nation's universities, federal 
laboratories and nonprofit research institutions into new commercial 
technologies. It does this by joining the ideas and resources of 
research institutions with the commercialization experience of small 
companies.
  To receive an award under the STTR Program, a research institution 
and a small firm jointly submit a proposal to conduct research on a 
topic that reflects an agency's mission and research and development 
needs. The proposals are then peer-reviewed and judged on their 
scientific, technical and commercial merit.
  Numerous benefits result from the Federal government fostering 
collaborations between research institutions and small firms. Small 
firms have shown themselves to be excellent at commercializing research 
when they are provided the opportunity to take advantage of the 
expertise and resources that reside in our nation's universities. A 
recent report by the Small Business Administration's Office of Advocacy 
reviewed the rate of return for research and development by large and 
small firms both with and without university partners. When these firms 
do not have university partners, their rate of return is 14 percent. 
When a collaboration is formed between universities and small firms, 
however, the rate of return jumps to 44 percent. By contrast, the rate 
of return only increases

[[Page S9409]]

to 30 percent when large firms and universities collaborate.
  Moreover, partnerships between small firms and universities have led 
to world-class high-technology economic development. Numerous studies 
cite the emergence of Silicon Valley and the Route 128 corridor in 
Massachusetts as directly resulting from the partnerships and 
technology transfer that occurred, and are still occurring, among small 
firms, Stanford University and the Massachusetts Institute of 
Technology. The cooperation between industry and these universities has 
strengthened considerably our economic competitiveness in the world. 
The STTR Program seeks to foster this same type of economic development 
in the hundreds of communities around the country that contain 
universities and federal laboratories. Further, the STTR Program has 
proven to be immensely successful at growing small firms from these 
types of partnerships.
  In a Committee hearing this year on the STTR Program, the General 
Accounting Office (GAO) reported on the commercial success of small 
firms participating in the STTR program between 1995 and 1997. The 
GAO's findings are truly remarkable. Of the 102 projects surveyed in 
that time-frame, over 53 percent had either resulted in sales or 
follow-on developmental funding for the technology. Through 2000, these 
projects had resulted in $132 million from sales and $53 million in 
additional developmental funding. Moreover, the GAO reported that the 
companies that received the STTR awards are projecting an additional 
$186 million in sales in 2001 and an estimated additional $900 million 
in sales by 2005. These numbers are even more outstanding since it 
typically takes between 7 to 10 years to commercialize new technologies 
successfully.
  In addition to proving to be an amazing commercial success, the STTR 
Program has also provided high-quality research to the Federal 
government. The GAO has reported in the past that Federal agencies give 
high ratings to the technical quality of STTR research proposals. The 
Department of Energy, for example, rated the quality of the proposed 
research in the top ten percent of all research funded by the 
Department.
  A good example of the benefits that the STTR Program provides to 
small firms and universities is the experience of Engineering Software 
Research and Development, Inc. in St. Louis, Missouri. The chairman and 
founder of that company, Dr. Barna Szabo, testified on the STTR program 
before the Committee in July of this year. Engineering Software, in 
partnership with Washington University in St. Louis, received a phase 
two award from the Air Force to develop an innovative method of 
analyzing the stresses placed on composite materials. While this 
technology is currently being used in the aeronautics industry, it has 
many other practical applications.
  The STTR Program permitted Dr. Szabo, who had originated an algorithm 
he developed at Washington University, to transfer the technology to 
Engineering Software, which had the software infrastructure to 
transition the technology from an academic to a practical commercial 
application. According to Dr. Szabo, Engineering Software has received 
an estimated $1.25 million in sales and follow-on developmental funding 
resulting from the technology funded by the STTR award and that the 
STTR Program was of great assistance in transferring the technology 
from the academic environment to actual use and application.
  Based on the proven success of the STTR Program to date this 
legislation increases the funds allocated for the program from .15 
percent to .3 percent of an agency's extramural research and 
development budget. This increase will not require any additional 
appropriations but merely will reallocate funds in the participating 
agencies to this successful program. I thank Senator Levin and Senator 
Warner on the Armed Services Committee for working closely with Senator 
Kerry and me to make such an increase possible. When a program is 
working as well as the STTR Program, it would be a mistake if Congress 
did not build on its success.
  This is especially true for Federal investment in small business 
research and development. Despite report after report demonstrating 
that small businesses innovate at a greater rate that large firms, 
small businesses receive less than four percent of all Federal research 
and development dollars. This number has remained essentially unchanged 
for the past 22 years. Increasing funds for the STTR Program sends a 
strong message that the Federal government acknowledges the 
contributions that small businesses have made and will continue to make 
to government research and development efforts and to our nation's 
economy.
  Mr. President, Senator Kerry and I have worked together to produce a 
sound, bipartisan bill. This legislation is good for the small business 
high-technology community and will ensure that our Federal research and 
development needs are well met in the next decade. I trust that the 
bill will receive the overwhelming support of my colleagues.
  Mr. REID. Mr. President, I ask unanimous consent that the substitute 
amendment be agreed to, the bill, as amended, be considered read a 
third time and passed, the motion to reconsider be laid upon the table, 
and that any statements relating to the bill be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 1569) was agreed to.
  The bill (S. 856), as amended, was read the third time and passed.

                          ____________________