[Congressional Record Volume 151, Number 161 (Thursday, December 15, 2005)]
[Senate]
[Pages S13663-S13677]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ENSIGN (for himself, Mr. Lieberman, Mr. Lugar, Mr. DeWine, 
        Mr. Allen, Mr. Bingaman, Mr. Alexander, Mr. Chambliss, Mr. 
        Bayh, Mr. Nelson of Florida, Mr. Kohl, Mr. Cornyn, Mr. Isakson, 
        Mr. Smith, Mr. Leahy, and Mr. Nelson of Nebraska):
  S. 2109. A bill to provide national innovation initiative; to the 
Committee on Finance.
  Mr. ENSIGN. Mr. President, I rise today to discuss important new 
innovation legislation that will address concerns about our country and 
our ability to compete in the global marketplace. Today, Senator 
Lieberman and I introduced the National Innovation bill with bipartisan 
support from Senator Lugar, Senator DeWine, Senator Bingaman, Senator 
Allen, Senator Alexander, Senator Chambliss, Senator Bayh, Senator Bill 
Nelson, Senator Kohl, Senator Cornyn, Senator Isakson, Senator Ben 
Nelson Senator Leahy and Senator Smith as original cosponsors. We 
encourage all of our colleagues to join us in this important effort.
  Today the World is becoming dramatically more interconnected and 
competitive. In order to remain globally competitive, the United States 
must continue to lead the world's innovation. Innovation fosters the 
new ideas, technologies, and processes that lead to better jobs, higher 
wages, and a higher standard of living.
  Unfortunately, in the disciplines that foster innovation in the 21st 
Century--science, technology, engineering, and mathematics--America is 
steadily losing its global edge:
  The trouble signs are numerous:
  Less than 6 percent of high school seniors plan to pursue engineering 
degrees, down from 36 percent from a decade ago.
  In 2000, only 17 percent of undergraduate degrees earned in the 
United States were in the hard sciences.
  In the same year 56 percent of China's undergraduate degrees were in 
the hard sciences.
  Next year, China will likely produce six times the number of 
engineers that we will graduate in the United States.
  We must address these long-term competitive challenges to America's 
economic vitality and national security now or risk losing our 
essential leadership position on innovation. The National Innovation 
Act will help America meet these interconnected challenges by 
addressing three primary areas of importance to maintaining and 
improving United States' innovation in the 21st Century: 1. increasing 
research investment 2. increasing science and technology talent, and 3. 
developing an innovation infrastructure.
  I am a fiscal conservative, and current Federal budget constraints 
will require prioritization of spending. New programs must be funded 
through existing funds or through identifiable funding offsets whenever 
possible. I look forward to working with Senator Lieberman and the 
other cosponsors in this effort.
  Increased support of basic research through should be a national 
priority.
  Our bill would increases the national commitment to basic research by 
nearly doubling research funding for the National Science Foundation 
(NSF) by FY 2011. The National Science Foundation plays a critical role 
in underwriting basic research at colleges, universities, and other 
institutions throughout our nation.
  NSF supported basic research in chemistry, physics, nanotechnology, 
and semiconductor manufacturing has brought about some of the most 
significant innovations of the last 20 years. For example, the World 
Wide Web, magnetic resonance imaging and fiber optics technology all 
emerged through basic research projects that received NSF funding.
  Because our nation's long-term future economic strength depends in 
large part on the support we give to basic research projects now, the 
National Innovation bill also establishes the Innovation Acceleration 
Grants Program, which encourages Federal agencies funding research in 
science, technology, engineering, and mathematics to allocate at least 
3 percent of

[[Page S13664]]

their Research and Development (R&D) budgets to grants directed toward 
high-risk frontier research.
  Three percent of overall R&D budgets from federal agencies may not 
seem like a lot, but this is an important starting point. Although our 
bill does not specifically require it, I encourage federal agencies 
engaged in R&D to dedicate an even greater percentage of their budgets 
to basic research.
  Along with strategic investment in the innovation economy, the 
Federal Government also needs to examine various barriers that impede 
innovation in the United States.
  Our bill instructs the National Academy of Sciences to study factors 
such as tort litigation that may impede American businesses from 
engaging in innovation risk-taking and provide recommendations on how 
best to address these issues. Litigation, taxation, and the substantial 
costs of regulatory compliance impact innovation and need to be 
addressed.
  Innovation must be a major priority as the United States looks to 
retain and strengthen its economic leadership and national security in 
the 21st Century. The National Innovation Act will help ensure that the 
Federal Government does exactly that by increasing research investment, 
increasing science and technology talent, and developing an innovation 
infrastructure.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2109

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``National 
     Innovation Act of 2005''.
       (b) Table of Contents.--
       The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.

                     TITLE I--INNOVATION PROMOTION

Sec. 101. President's Council on Innovation.
Sec. 102. Innovation acceleration grants.
Sec. 103. A national commitment to basic research.
Sec. 104. Regional economic development.
Sec. 105. Development of advanced manufacturing systems.
Sec. 106. Study on service science.

 TITLE II--MODERNIZATION OF SCIENCE, EDUCATION, AND HEALTHCARE PROGRAMS

                   Subtitle A--Science and Education

Sec. 201. Graduate fellowships and graduate traineeships.
Sec. 202. Professional science master's degree programs.
Sec. 203. Increased support for science education through the National 
              Science Foundation.
Sec. 204. Innovation-based experiential learning.

               Subtitle B--21st Century Healthcare System

Sec. 211. Sense of Congress regarding 21st century healthcare system.

            TITLE III--INCENTIVES FOR ENCOURAGING INNOVATION

                      Subtitle A--Research Credits

Sec. 301. Permanent extension of research credit.
Sec. 302. Increase in rates of alternative incremental credit.
Sec. 303. Alternative simplified credit for qualified research 
              expenses.

                    Subtitle B--Health and Education

Sec. 311. Study and report on catastrophic healthcare.
Sec. 312. Lifelong learning accounts.

                  Subtitle C--Savings and Investments

Sec. 321. Regulations relating to private foundation support of 
              innovations in economic development.
Sec. 322. Advisory group regarding valuation of intangibles.

                TITLE IV--DEPARTMENT OF DEFENSE MATTERS

               Subtitle A--Defense Research and Education

Sec. 401. Revitalization of frontier and multidisciplinary research.
Sec. 402. Enhancement of education.

               Subtitle B--Defense Advanced Manufacturing

Sec. 411. Manufacturing research and development.
Sec. 412. Transition of transformational manufacturing processes and 
              technologies to the defense manufacturing base.
Sec. 413. Manufacturing technology strategies.
Sec. 414. Planning for adoption of strategic innovation.
Sec. 415. Report.
Sec. 416. Authorization of appropriations.

                  TITLE V--JUDICIARY AND OTHER MATTERS

Sec. 501. Sense of Congress on retaining high-tech talent in the United 
              States.
Sec. 502. Study on barriers to innovation.
Sec. 503. Sense of Congress on patent reform.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress makes the following findings:
       (1) The United States is the most innovative Nation in the 
     world. Since our Nation's founding, exploration, opportunity, 
     and discovery have remained essential to fulfilling our 
     Nation's strategic economic and political objectives.
       (2) In the 21st century, a well-educated and trained 
     workforce, investment in research and development, and a 
     regulatory and physical infrastructure that supports 
     innovators are essential to ensuring that the United States 
     continues to lead the global economy on innovation.
       (3) America's future economic and national security will 
     largely depend on the creativity and commitment of our Nation 
     to unleash its innovation capacity.
       (4) The world has become dramatically more interconnected 
     and competitive. Cutting edge research, world-class 
     education, and highly skilled labor pools are no longer 
     within the sole purview of the United States.
       (5) The United States investment in basic research is 
     currently insufficient to meet the challenges we face.
       (6) Federal support for basic research in the physical 
     sciences has consistently lagged behind that given to the 
     life sciences in recent years.
       (7) Traditional measurements of innovation capacity focused 
     solely on inputs, such as research and development spending, 
     number of patents and value of physical infrastructure. The 
     traditional measurements are necessary but are not sufficient 
     metrics for innovation in the 21st century's knowledge 
     economy.
       (8) Current Federal budget constraints require 
     prioritization of spending and new programs must be funded 
     through existing funds or through identifiable funding 
     offsets whenever possible.
       (9) A national, private sector-led, and government 
     supported plan is required if the United States is to 
     adequately respond to the challenges of increased global 
     competition and take advantage of the opportunities this 
     changing global dynamic presents.
       (b) Purposes.--The purposes of this Act are to--
       (1) make innovation a fundamental economic priority for the 
     United States;
       (2) create the most fertile policy environment for 
     innovation to occur;
       (3) develop greater numbers of American scientists, 
     mathematicians, and engineers;
       (4) enhance the quality of math and science education at 
     all levels;
       (5) increase the Federal Government's investment in basic 
     research, especially in the physical sciences;
       (6) direct greater funding toward multidisciplinary and 
     frontier research where tomorrow's innovations are most 
     likely to occur;
       (7) secure a strong advanced manufacturing base in the 
     United States to ensure that as innovations occur, America is 
     poised to reap the benefits via the creation of new jobs and 
     investment; and
       (8) examine both the incentives for, and barriers to, 
     innovation to better understand what additional policy 
     changes are warranted.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Congressional defense committees.--The term 
     ``congressional defense committees'' has the meaning given 
     that term in section 101(a)(16) of title 10, United States 
     Code.
       (2) Defense manufacturing base.--The term ``defense 
     manufacturing base'' includes any supplier of the Department 
     of Defense, including a supplier of raw materials.
       (3) Executive agency.--The term ``Executive agency'' has 
     the meaning given that term in section 105 of title 5, United 
     States Code.
       (4) Extended production enterprise.--The term ``extended 
     production enterprise'' means a system in which key entities 
     in the manufacturing chain, including entities engaged in 
     product design and development, manufacturing, sourcing, 
     distribution, and user entities, are linked together through 
     information technology and other means to promote efficiency 
     and productivity.
       (5) Innovation.--The term ``innovation'' means the 
     intersection of invention and insight leading to the creation 
     of social and economic value, including through efforts 
     meeting fundamental technology challenges and involving 
     multidisciplinary work and a high degree of novelty.
       (6) Manufacturing extension partnership program.--The term 
     ``Manufacturing Extension Partnership Program'' means the 
     Manufacturing Extension Partnership Program of the Department 
     of Commerce.
       (7) Manufacturing technology program.--The term 
     ``Manufacturing Technology Program'' means the Manufacturing 
     Technology Program under section 2521 of title 10, United 
     States Code.
       (8) Professional science masters program.--The term 
     ``professional science masters program'' means a graduate 
     degree program in science and mathematics that extends 
     science training to strategic planning and business 
     management and focuses on

[[Page S13665]]

     multidisciplinary specialties such as business and 
     information technology (IT), biology and IT (bioinformatics), 
     and computational chemistry.
       (9) Regional innovation hot spots defined.--The term 
     ``regional innovation hot spots'' means regions that are 
     defined by a high degree of innovation and the availability 
     of talent, investment, and infrastructure necessary to create 
     and sustain such innovation.
       (10) Service science.--The term ``service science'' means 
     curriculums, research programs, and training regimens, 
     including service sciences, management, and engineering 
     (SSME) programs, that exist or that are being developed to 
     teach individuals to apply technology, organizational process 
     management, and industry-specific knowledge to solve complex 
     problems.
       (11) Small business innovation research program.--The term 
     ``Small Business Innovation Research Program'' has the 
     meaning given that term in section 2500(11) of title 10, 
     United States Code.
       (12) Small business technology transfer program.--The term 
     ``Small Business Technology Transfer Program'' has the 
     meaning given that term in section 2500(12) of title 10, 
     United States Code.
       (13) SSME.--The term ``SSME'' means the discipline known as 
     service sciences, management, and engineering that--
       (A) applies scientific, engineering and management 
     disciplines to tasks that one organization performs 
     beneficially for others, generally as part of the services 
     sector of the economy; and
       (B) integrates computer science, operations research, 
     industrial engineering, business strategy, management 
     sciences, and social and legal sciences, in order to 
     encourage innovation in how organizations create value for 
     customers and shareholders that could not be achieved through 
     such disciplines working in isolation.

                     TITLE I--INNOVATION PROMOTION

     SEC. 101. PRESIDENT'S COUNCIL ON INNOVATION.

       (a) In General.--The President shall establish a 
     President's Council on Innovation (in this section referred 
     to as the ``Council'').
       (b) Duties.--The Council's duties shall include--
       (1) monitoring implementation of legislative proposals and 
     initiatives for promoting innovation, including policies 
     related to research funding, taxation, immigration, trade, 
     and education that are proposed in this and other Acts;
       (2) in consultation with the Director of the Office of 
     Management and Budget, developing a process for using metrics 
     to assess the impact of existing and proposed policies and 
     rules that affect innovation capabilities in the United 
     States;
       (3) identifying opportunities and making recommendations 
     for the heads of executive agencies to improve innovation, 
     monitoring, and reporting on the implementation of such 
     recommendations;
       (4) developing metrics for measuring the progress of the 
     Federal Government with respect to improving conditions for 
     innovation, including through talent development, investment, 
     and infrastructure improvements; and
       (5) submitting an annual report to the President and 
     Congress on such progress.
       (c) Membership and Coordination.--
       (1) Membership.--The Council shall be composed of the 
     Secretary or head of each of the following:
       (A) The Department of Commerce.
       (B) The Department of Defense.
       (C) The Department of Education.
       (D) The Department of Energy.
       (E) The Department of Health and Human Services.
       (F) The Department of Homeland Security.
       (G) The Department of Labor.
       (H) The Department of the Treasury.
       (I) The National Aeronautics and Space Administration.
       (J) The Securities and Exchange Commission.
       (K) The National Science Foundation.
       (L) The Office of the United States Trade Representative.
       (M) The Office of Management and Budget.
       (N) The Office of Science and Technology Policy.
       (2) Chairperson.--The Secretary of Commerce shall serve as 
     chairperson of the Council.
       (3) Coordination.--The chairperson of the Council shall 
     ensure appropriate coordination between the Council and the 
     National Economic Council and the National Security Council.
       (d) Development of Innovation Agenda.--
       (1) In general.--The Council shall develop a comprehensive 
     agenda for strengthening the innovation capabilities of the 
     Federal Government and State governments, academia, and the 
     private sector in the United States.
       (2) Consultation.--The comprehensive agenda required by 
     paragraph (1) shall be developed in consultation with 
     appropriate representatives of the private sector, scientific 
     organizations, and academic organizations.

     SEC. 102. INNOVATION ACCELERATION GRANTS.

       (a) Grant Program.--The President shall establish a grant 
     program, to be known as the ``Innovation Acceleration Grants 
     Program'', to support and promote innovation in the United 
     States. Priority in the awarding of grants shall be given to 
     projects that meet fundamental technology challenges and that 
     involve multidisciplinary work and a high degree of novelty.
       (b) Awarding of Grants Through Departments and Agencies.--
       (1) Funding goals.--The President shall ensure that it is 
     the goal of each Executive agency that finances research in 
     science, mathematics, engineering, and technology to allocate 
     at least 3 percent of the agency's total annual research and 
     development budget to funding grants under the Innovation 
     Acceleration Grants Program.
       (2) Administration.--
       (A) In general.--Each head of an Executive agency awarding 
     grants under paragraph (1) shall submit a plan for 
     implementing the grant program within such Executive agency 
     to the Director of the Office of Science and Technology 
     Policy and the Director of the Office of Management and 
     Budget. The implementation plan shall be submitted not later 
     than 90 days after the date of enactment of this Act. The 
     implementation plan may incorporate existing initiatives of 
     the Executive agencies that promote research in innovation as 
     described in subsection (a).
       (B) Required metrics.--The head of each Executive agency 
     submitting an implementation plan pursuant to this section 
     shall include metrics upon which grant funding decisions will 
     be made and metrics for assessing the success of the grants 
     awarded.
       (C) Grant duration and renewals.--
       (i) In general.--Any grants issued by an Executive agency 
     under this section shall be for a period not to exceed 3 
     years.
       (ii) Evaluation.--Not later than 90 days prior to the 
     expiration of a grant issued under this section, the 
     Executive agency that approved the grant shall complete an 
     evaluation of the effectiveness of the grant based on the 
     metrics established pursuant to subparagraph (B). In its 
     evaluation, the Executive agency shall consider the extent to 
     which the program funded by the grant met the goals of 
     quality improvement and job creation.
       (iii) Publication of review.--The Executive agency shall 
     publish and make available to the public the review of each 
     grant approved pursuant to this section.
       (iv) Failure to meet metrics.--Any grant that the Executive 
     agency awarding the grant determines has failed to satisfy 
     any of the metrics developed pursuant to subparagraph (B), 
     shall not be eligible for a renewal.
       (v) Renewal.--A grant issued under this section that 
     satisfies all of the metrics developed pursuant to 
     subparagraph (B), may be renewed once for a period not to 
     exceed 3 years. Additional renewals may be considered only if 
     the head of the Executive agency makes a specific finding 
     that the program being funded involves a significant 
     technology advance that requires a longer timeframe to 
     complete critical research, and the research satisfies all 
     the metrics developed pursuant to subparagraph (B).

     SEC. 103. A NATIONAL COMMITMENT TO BASIC RESEARCH.

       (a) Plan for Increased Research.--Not later than 180 days 
     after the date of the enactment of this Act, the Director of 
     the National Science Foundation shall submit to Congress a 
     comprehensive, multiyear plan that describes how the funds 
     authorized in subsection (b) shall be used. Such plan shall 
     be developed with a focus on utilizing basic research in 
     physical science and engineering to optimize the United 
     States economy as a global competitor and leader in 
     productive innovation.
       (b) Increased Funding for National Science Foundation.--
     There are authorized to be appropriated to the National 
     Science Foundation for the purpose of doubling research 
     funding the following amounts:
       (1) $6,440,000,000 for fiscal year 2007.
       (2) $7,280,000,000 for fiscal year 2008.
       (3) $8,120,000,000 for fiscal year 2009.
       (4) $8,960,000,000 for fiscal year 2010.
       (5) $9,800,000,000 for fiscal year 2011.
       (c) Recommendations for Research and Development Funding.--
     Not later than 1 year after the date of the enactment of this 
     Act, the Director of the Office of Science and Technology 
     Policy shall evaluate and, as appropriate, submit to Congress 
     recommendations for an increase in funding for research and 
     development in physical sciences and engineering in 
     consultation with agencies and departments of the United 
     States with significant research and development budgets.

     SEC. 104. REGIONAL ECONOMIC DEVELOPMENT.

       (a) Development of Funding Strategy.--
       (1) In general.--The Assistant Secretary for Economic 
     Development of the Department of Commerce shall review 
     Federal programs that support local economic development and 
     prepare and implement a strategy to focus funding on 
     initiatives that improve the ability of communities to 
     participate successfully in the modern economy through 
     innovation. In preparing the strategy, priority should be 
     given to projects that--
       (A) emphasize private sector cooperation with State and 
     local governments and nonprofit organizations focused on 
     regional economic development as the means of achieving 
     specific objectives related to the support and promotion of 
     innovation; and
       (B) are the most successful in meeting the metrics 
     established under subsection (b).
       (2) Coordination.--The Assistant Secretary shall coordinate 
     the development and implementation of the strategy with the 
     activities carried out by the Under Secretary for Technology 
     under subsection (d).
       (b) Evaluation of Programs.--The Assistant Secretary for 
     Economic Development of

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     the Department of Commerce shall develop metrics to measure 
     the success of Federal programs in supporting and promoting 
     innovation at the local community level while minimizing 
     bureaucracy and overhead expenses.
       (c) Promotion of Economic Development Opportunities.--The 
     Assistant Secretary for Economic Development of the 
     Department of Commerce should work with organizations focused 
     on economic development to highlight opportunities for such 
     organizations to serve local communities through grants 
     focused on economic development and investment in companies 
     pursuing innovation.
       (d) Regional Innovation Hot Spots.--
       (1) Promotion of regional innovation hot spots.--The Under 
     Secretary for Technology of the Department of Commerce shall 
     coordinate activities focused on promoting innovation through 
     the development of regional innovation hot spots.
       (2) Guide to developing successful regional innovation hot 
     spots.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of Commerce, in 
     consultation with representatives of regional innovation hot 
     spots, shall publish a report, to be titled the ``Guide to 
     Developing Successful Regional Innovation Hot Spots'', that 
     examines successful regional innovation hot spots and 
     includes recommendations for establishing and fostering 
     regional innovation hot spots.
       (B) Content.--The report required under subparagraph (A) 
     shall--
       (i) include information on the evaluation of human capital;
       (ii) include information on the role of sponsoring 
     institutions, such as universities, nonprofit organizations, 
     and laboratories, in establishing and fostering regional 
     innovation hot spots;
       (iii) include information on the role of State and local 
     government leaders, leaders in the research and business 
     communities, and community organizations in establishing and 
     fostering regional innovation hot spots;
       (iv) discuss the importance of collaboration by public and 
     private sector leaders;
       (v) identify sources of funding for these activities within 
     Federal, State, and local governments and the private sector; 
     and
       (vi) include recommendations for developing strategic plans 
     to stimulate innovation, including recommendations relating 
     to knowledge transfer and commercialization, the support of 
     regional entrepreneurship and increased innovation within 
     existing regional firms, and the linking of primary 
     institutions engaged in the innovation process.
       (3) Regional innovation hot spot metrics.--
       (A) Development of metrics.--In conjunction with publishing 
     the report required under paragraph (2), the Secretary of 
     Commerce shall develop the following sets of metrics:
       (i) Metrics to be considered for identifying potential 
     regional innovation hot spots (in this subsection referred to 
     as ``identifying metrics'').
       (ii) Metrics to be considered for evaluating the impact and 
     effectiveness of established regional innovation hot spots 
     (in this subsection referred to as ``evaluation metrics'').
       (B) Use of metrics.--The Under Secretary of Commerce for 
     Technology shall use the identifying metrics to conduct 
     biannual assessments of potential regional clusters and shall 
     use the evaluation metrics to assess the impact and 
     effectiveness of established regional innovation hot spots in 
     improving the regional economy and regional job market. The 
     Under Secretary shall also assess the cost effectiveness of 
     operating within each regional hot spot. The Under Secretary 
     shall report the biannual assessments to Congress.

     SEC. 105. DEVELOPMENT OF ADVANCED MANUFACTURING SYSTEMS.

       (a) Research and Development.--The Director of the National 
     Institute of Standards and Technology shall support research 
     and development in collaboration with entities and 
     organizations from the industrial sector to supplement and 
     support work in the private sector on advanced manufacturing 
     systems designed to increase productivity and efficiency and 
     to create competitive advantages for United States 
     businesses. These research and development activities should 
     focus on the following activities:
       (1) Supporting industry efforts to develop innovative, 
     state-of-the-art manufacturing processes, advanced 
     technologies through interoperable standards, and related 
     concepts, including--
       (A) advanced distributed and desktop manufacturing linked 
     to and made compatible with the extended production 
     enterprise system described in paragraph (2);
       (B) non-contact quality inspection processes linked to and 
     made compatible with the extended production enterprise 
     system;
       (C) small lot manufacturing processes that are--
       (i) as cost-effective as mass production processes; and
       (ii) linked to and compatible with the extended production 
     enterprise system; and
       (D) the use of state-of-the-art materials and processes at 
     the nanotechnological level.
       (2) Supporting industry efforts to develop an extended 
     production enterprise system that integrates key entities, 
     including entities engaged in product design and development, 
     manufacturing, sourcing, distribution, and user entities, 
     including through the development of--
       (A) interoperable software and standards designed to 
     maximize the compatibility of the design, modeling, and 
     manufacturing stages of the manufacturing process; and
       (B) supply chain software.
       (b) Coordination of Activities.--The Director of the 
     National Institute of Standards and Technology shall 
     coordinate activities under subsection (a) with activities 
     under--
       (1) the Small Business Innovation Research Program;
       (2) the Small Business Technology Transfer Program; and
       (3) the Manufacturing Technology Program of the Department 
     of Defense.
       (c) Testing.--The Director of the National Institute of 
     Standards and Technology shall support the work of entities 
     and organizations from the industrial sector in developing 
     prototypes and testing areas for testing and refining, in 
     actual production conditions, the processes, technologies, 
     and extended production enterprise system described in 
     subsection (a)(2) in order to maximize productivity gains and 
     cost efficiencies.
       (d) Development of Standards.--The Director of the National 
     Institute of Standards and Technology, in coordination with 
     entities and organizations from the industrial sector and the 
     Manufacturing Technology Program, shall support standards to 
     be used as manufacturing performance criteria to accelerate 
     the adoption of improvements and innovative processes and 
     protocols developed under subsection (a).
       (e) Pilot Test Beds of Excellence.--
       (1) Establishment.--The Director of the National Institute 
     of Standards and Technology shall, in collaboration with 
     entities and organizations from the industrial sector, 
     support not more than 3 pilot test beds of excellence in 
     manufacturing fields important to advanced technologies 
     developed under subsection (a), such as nanotechnology, to be 
     used by the public and private sector. The test beds of 
     excellence shall focus on production development, 
     particularly the invention, prototyping, and engineering 
     development stages of the manufacturing process.
       (2) Competition.--The Secretary of Commerce shall conduct a 
     competition to select the pilot test beds of excellence based 
     on criteria and metrics established by the Secretary prior to 
     the competition.
       (3) Funding.--The Secretary of Commerce may provide the 
     pilot test beds of excellence selected pursuant to the 
     competition set forth in paragraph (2) with an appropriate 
     level of funding if and only if the following conditions are 
     satisfied:
       (A) No more than \1/3\ of the funding of each test bed of 
     excellence is provided by the Federal Government.
       (B) At least \1/3\ of the cost of each test bed of 
     excellence is provided by participants from the private 
     sector.
       (C) At least \1/3\ of the cost of each test bed of 
     excellence is provided by State or local governments.
       (4) Review of funded test beds.--Within 3 years of the 
     start of Federal funding for any test bed of excellence 
     pursuant to this section, the Secretary of Commerce shall use 
     the metrics established pursuant to paragraph (2) and any 
     additional review metrics that the Secretary determines 
     appropriate to assess the performance of the federally funded 
     test beds of excellence. Any test bed of excellence that 
     fails to satisfy any of the performance metrics will be 
     ineligible for additional Federal funding.
       (5) Sunset provision.--Federal funding of any test bed of 
     excellence shall cease 5 years after the date of enactment of 
     this Act.
       (f) Manufacturing Extension Partnership Focus on 
     Innovation.--The Director of the National Institute of 
     Standards and Technology shall ensure that the Manufacturing 
     Extension Partnership program develops a focus on innovation, 
     including through technology diffusion, supply and 
     distribution chain integration, and the dissemination of the 
     processes, technologies, and extended production enterprise 
     systems developed under this section.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Department of Commerce for the 
     purpose of carrying out activities under this section the 
     following amounts:
       (1) $20,000,000 for fiscal year 2007.
       (2) $40,000,000 for fiscal year 2008.
       (3) $60,000,000 for fiscal year 2009.
       (4) $80,000,000 for fiscal year 2010.
       (5) $100,000,000 for fiscal year 2011.

     SEC. 106. STUDY ON SERVICE SCIENCE.

       (a) Sense of Congress.--It is the sense of Congress that, 
     in order to strengthen the competitiveness of United States 
     enterprises and institutions and to prepare the people of the 
     United States for high-wage, high-skill employment, the 
     Federal Government should better understand and respond 
     strategically to the emerging vocation and learning 
     discipline known as service science.
       (b) Study.--Not later than 270 days after the date of the 
     enactment of this Act, the Director of the National Science 
     Foundation shall conduct a study and report to Congress 
     regarding how the Federal Government should support, through 
     research, education, and training, the new discipline of 
     service science.
       (c) Outside Resources.--In conducting the study under 
     subsection (b), the Director of the National Science 
     Foundation shall consult with leaders from 2- and 4-year 
     institutions of higher education, as defined in section 101 
     of the Higher Education Act of 1965 (20 U.S.C. 1001), leaders 
     from corporations, and other relevant parties.

[[Page S13667]]

 TITLE II--MODERNIZATION OF SCIENCE, EDUCATION, AND HEALTHCARE PROGRAMS

                   Subtitle A--Science and Education

     SEC. 201. GRADUATE FELLOWSHIPS AND GRADUATE TRAINEESHIPS.

       (a) Graduate Research Fellowship Program.--
       (1) In general.--During the 5-year period beginning on the 
     date of the enactment of this Act, the Director of the 
     National Science Foundation shall expand the Graduate 
     Research Fellowship Program of the Foundation so that an 
     additional 1250 fellowships are awarded to United States 
     citizens under such Program during such period.
       (2) Extension of fellowship period.--The Director of the 
     National Science Foundation is authorized to award 
     fellowships under the Graduate Research Fellowship Program 
     for a period of 5 years, subject to funds being made 
     available for such purpose.
       (3) Authorization of appropriations.--In addition to any 
     other amounts authorized to be appropriated, there are 
     authorized to be appropriated $34,000,000 for each of the 
     fiscal years 2007 through 2011 to provide an additional 250 
     fellowships under the Graduate Research Fellowship Program 
     during each such fiscal year.
       (b) Integrative Graduate Education and Research Traineeship 
     Program.--
       (1) In general.--During the 5-year period beginning on the 
     date of the enactment of this Act, the Director of the 
     National Science Foundation shall expand the Integrative 
     Graduate Education and Research Traineeship program of the 
     Foundation so that an additional 1,250 United States citizens 
     are awarded grants under such program during such period.
       (2) Authorization of appropriations.--In addition to any 
     other amounts authorized to be appropriated, there are 
     authorized to be appropriated $57,000,000 for each of the 
     fiscal years 2007 through 2011 to provide grants to an 
     additional 250 individuals under the Integrative Graduate 
     Education and Research Traineeship program during each such 
     fiscal year

     SEC. 202. PROFESSIONAL SCIENCE MASTER'S DEGREE PROGRAMS.

       (a) Definition of Institution of Higher Education.--In this 
     section, the term ``institution of higher education'' has the 
     meaning given the term in section 101(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1001(a)).
       (b) Clearinghouse.--
       (1) Development.--From amounts appropriated under 
     subsection (d), the Director of the National Science 
     Foundation shall establish a clearinghouse, in collaboration 
     with 4-year institutions of higher learning, industries, and 
     Federal agencies that employ science-trained personnel, to 
     share program elements used in successful professional 
     science master's degree programs.
       (2) Availability.--The Director of the National Science 
     Foundation shall make the clearinghouse of program elements 
     developed under paragraph (1) available to institutions of 
     higher education that are developing professional science 
     master's degree programs.
       (c) Pilot Programs.--
       (1) Program authorized.--From amounts appropriated under 
     subsection (d), the Director of the National Science 
     Foundation shall award grants for pilot programs to 4-year 
     institutions of higher education to facilitate the 
     institutions' creation or improvement of professional science 
     master's degree programs.
       (2) Application.--A 4-year institution of higher education 
     desiring a grant under this section shall submit an 
     application at such time, in such manner, and accompanied by 
     such information as the Director of the National Science 
     Foundation may require. The application shall include--
       (A) a description of the professional science master's 
     degree program that the institution of higher education will 
     implement;
       (B) the amount of funding from non-Federal sources, 
     including from private industries, that the institution of 
     higher education shall use to support the professional 
     master's degree program; and
       (C) an assurance that the institution of higher education 
     shall encourage students in the professional science master's 
     degree program to apply for all forms of Federal assistance 
     available to such students, including applicable graduate 
     fellowships and student financial assistance under title IV 
     of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.).
       (3) Preference for alternative funding sources.--The 
     Director of the National Science Foundation shall give 
     preference in making awards to 4-year institutions of higher 
     education seeking Federal funding to support pilot 
     professional science master's degree programs, to those 
     applicants that secure more than \2/3\ of the funding for 
     such professional science master's degree programs from 
     sources other than the Federal Government.
       (4) Number of grants; time period of grants.--
       (A) Number of grants.--Subject to the availability of 
     appropriated funds, the Director of the National Science 
     Foundation shall award grants under paragraph (1) to a 
     maximum of 200 4-year institutions of higher education.
       (B) Time period of grants.--Grants awarded under this 
     section shall be for one 3-year term. Grants may be renewed 
     only once for a maximum of 2 additional years.
       (5) Evaluation and reports.--
       (A) Development of performance benchmarks.--Prior to the 
     start of the grant program, the National Science Foundation, 
     in collaboration with 4-year institutions of higher 
     education, shall develop performance benchmarks to evaluate 
     the pilot programs assisted by grants under this section.
       (B) Evaluation.--For each year of the grant period, the 
     Director of the National Science Foundation, in consultation 
     with 4-year institutions of higher education, industry, and 
     Federal agencies that employ science-trained personnel, shall 
     complete an evaluation of each pilot program assisted by 
     grants under this section. Any pilot program that fails to 
     satisfy the performance benchmarks developed under 
     subparagraph (A) shall not be eligible for further funding.
       (C) Report.--Not later than 180 days after the completion 
     of an evaluation described in subparagraph (A), the Director 
     of the National Science Foundation, in consultation with 
     industries and Federal agencies that employ science-trained 
     personnel, shall submit a report to Congress that includes--
       (i) the results of the evaluation described in subparagraph 
     (A); and
       (ii) recommendations for administrative and legislative 
     action that could optimize the effectiveness of the pilot 
     programs, as the Director determines to be appropriate.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $20,000,000 for 
     fiscal year 2007 and such sums as may be necessary for each 
     succeeding fiscal year.

     SEC. 203. INCREASED SUPPORT FOR SCIENCE EDUCATION THROUGH THE 
                   NATIONAL SCIENCE FOUNDATION.

       There are authorized to be appropriated to carry out the 
     science, mathematics, engineering, and technology talent 
     expansion program under section 8(7) of the National Science 
     Foundation Authorization Act of 2002 (Public Law 107-368, 116 
     Stat. 3042) the following amounts:
       (1) For fiscal year 2007, $35,000,000.
       (2) For fiscal year 2008, $50,000,000.
       (3) For fiscal year 2009, $100,000,000.
       (4) For fiscal year 2010, $150,000,000.

     SEC. 204. INNOVATION-BASED EXPERIENTIAL LEARNING.

       (a) Pilot Program.--
       (1) Program authorized.--The Director of the National 
     Science Foundation shall award grants to local educational 
     agencies to enable the local educational agencies to 
     implement innovation-based experiential learning in a total 
     of 500 secondary schools and 500 elementary or middle schools 
     in the United States.
       (2) Application.--A local educational agency desiring a 
     grant under this section shall submit an application at such 
     time, in such manner, and accompanied by such information as 
     the Director of the National Science Foundation may require.
       (b) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $10,000,000 for 
     fiscal year 2007 and $20,000,000 for each of the fiscal years 
     2008 and 2009.

               Subtitle B--21st Century Healthcare System

     SEC. 211. SENSE OF CONGRESS REGARDING 21ST CENTURY HEALTHCARE 
                   SYSTEM.

       (a) Sense of Congress.--It is the sense of Congress that, 
     in order to improve the United States healthcare system for 
     the 21st century, the Federal Government should encourage the 
     widespread adoption of interoperable health information 
     technology by--
       (1) facilitating the creation of standards for 
     interoperable electronic reporting of healthcare data; and
       (2) after such standards have been created, each Federal 
     agency or department that collects data for the purposes 
     described in subsection (b) should collect such data in a 
     manner that is consistent with such standards.
       (b) Purposes Described.--The purposes described in this 
     subsection include quality reporting, surveillance, 
     epidemiology, adverse event reporting, research, or for other 
     purposes determined appropriate by the Secretary of Health 
     and Human Services.

            TITLE III--INCENTIVES FOR ENCOURAGING INNOVATION

                      Subtitle A--Research Credits

     SEC. 301. PERMANENT EXTENSION OF RESEARCH CREDIT.

       (a) In General.--Section 41 of the Internal Revenue Code of 
     1986 (relating to credit for increasing research activities) 
     is amended by striking subsection (h).
       (b) Conforming Amendment.--Section 45C(b)(1) of the 
     Internal Revenue Code of 1986 is amended by striking 
     subparagraph (D).
       (c) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

     SEC. 302. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL 
                   CREDIT.

       (a) In General.--Subparagraph (A) of section 41(c)(4) of 
     the Internal Revenue Code of 1986 (relating to election of 
     alternative incremental credit) is amended--
       (1) by striking ``2.65 percent'' and inserting ``3 
     percent'';
       (2) by striking ``3.2 percent'' and inserting ``4 
     percent''; and
       (3) by striking ``3.75 percent'' and inserting ``5 
     percent''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

[[Page S13668]]

     SEC. 303. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED 
                   RESEARCH EXPENSES.

       (a) In General.--Subsection (c) of section 41 of the 
     Internal Revenue Code of 1986 (relating to base amount) is 
     amended by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively, and by inserting after paragraph 
     (4) the following new paragraph:
       ``(5) Election of alternative simplified credit.--
       ``(A) In general.--At the election of the taxpayer, the 
     credit determined under subsection (a)(1) shall be equal to 
     12 percent of so much of the qualified research expenses for 
     the taxable year as exceeds 50 percent of the average 
     qualified research expenses for the 3 taxable years preceding 
     the taxable year for which the credit is being determined.
       ``(B) Special rule in case of no qualified research 
     expenses in any of 3 preceding taxable years.--
       ``(i) Taxpayers to which subparagraph applies.--The credit 
     under this paragraph shall be determined under this 
     subparagraph if the taxpayer has no qualified research 
     expenses in any 1 of the 3 taxable years preceding the 
     taxable year for which the credit is being determined.
       ``(ii) Credit rate.--The credit determined under this 
     subparagraph shall be equal to 6 percent of the qualified 
     research expenses for the taxable year.
       ``(C) Election.--An election under this paragraph shall 
     apply to the taxable year for which made and all succeeding 
     taxable years unless revoked with the consent of the 
     Secretary. An election under this paragraph may not be made 
     for any taxable year to which an election under paragraph (4) 
     applies.''.
       (b) Coordination With Election of Alternative Incremental 
     Credit.--
       (1) In general.--Section 41(c)(4)(B) of the Internal 
     Revenue Code of 1986 (relating to election) is amended by 
     adding at the end the following: ``An election under this 
     paragraph may not be made for any taxable year to which an 
     election under paragraph (5) applies.''.
       (2) Transition rule.--In the case of an election under 
     section 41(c)(4) of the Internal Revenue Code of 1986 which 
     applies to the taxable year which includes the date of the 
     enactment of this Act, such election shall be treated as 
     revoked with the consent of the Secretary of the Treasury if 
     the taxpayer makes an election under section 41(c)(5) of such 
     Code (as added by subsection (a)) for such year.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

                    Subtitle B--Health and Education

     SEC. 311. STUDY AND REPORT ON CATASTROPHIC HEALTHCARE.

       (a) Study.--The Secretary of Health and Human Services and 
     the Secretary of Labor (in this subsection referred to as the 
     ``Secretaries'') jointly shall conduct a study to explore 
     methods for managing costs associated with catastrophic 
     healthcare events and costs associated with chronic disease. 
     The Secretaries shall work with healthcare providers, 
     pharmaceutical manufacturers, large and small employers, 
     health plans, and other interested private and public sector 
     entities to develop a consensus regarding potential 
     innovative approaches for reducing the financial risks 
     presented by such health problems and improving such 
     outcomes. The study shall consider, among other factors, the 
     role that best practices, health information technology, 
     evidence-based medicine, quality incentives, and comparative 
     clinical effectiveness research can play in improving 
     quality, value, and efficiency throughout the United States 
     healthcare system.
       (b) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Secretaries shall submit a report 
     to Congress on the results of the study conducted under 
     subsection (a), together with such recommendations for 
     administrative and legislative action as the Secretaries 
     determine to be appropriate.

     SEC. 312. LIFELONG LEARNING ACCOUNTS.

       (a) Study.--The Secretary of the Treasury, in collaboration 
     with the Secretary of Labor and the Secretary of Education, 
     shall conduct a study with recommendations for establishing 
     lifelong learning accounts which would be exempt from 
     taxation under the Internal Revenue Code of 1986 and from 
     which funds could only be used for educational or training 
     purposes. Such study shall consider whether individuals 
     should be allowed to transfer to such an account, without 
     incurring tax liability or penalties, funds which are--
       (1) held in accounts established under a plan described in 
     section 401(k), 403(b), or 457 of the Internal Revenue Code 
     of 1986; and
       (2) held in a qualified tuition program under section 529 
     of such Code.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary of the Treasury shall 
     submit to Congress a report on the study conducted under 
     subsection (a).

                  Subtitle C--Savings and Investments

     SEC. 321. REGULATIONS RELATING TO PRIVATE FOUNDATION SUPPORT 
                   OF INNOVATIONS IN ECONOMIC DEVELOPMENT.

       The Secretary of the Treasury or the Secretary's delegate 
     shall as soon as practicable issue regulations under 
     subchapter A of chapter 42 of the Internal Revenue Code of 
     1986 (relating to excise taxes on private foundations) 
     which--
       (1) clearly identify when distributions by private 
     foundations for purposes of stimulating economic development 
     will be treated as made for an exempt purpose described in 
     section 170(c)(2)(B) of such Code; and
       (2) clarify the circumstances under which private 
     foundations may make program-related investments described in 
     section 4944(c) of such Code in start-up ventures.

     SEC. 322. ADVISORY GROUP REGARDING VALUATION OF INTANGIBLES.

       (a) Establishment.--The Secretary of the Treasury shall 
     establish an advisory group consisting of representatives of 
     the public and private investment sector. The advisory group 
     shall include representatives from the Department of 
     Commerce, the Securities and Exchange Commission, the 
     Commodity Futures Trading Commission, the Board of Governors 
     of the Federal Reserve System, the New York Stock Exchange, 
     the National Association of Securities Dealers Automatic 
     Quotation System, and significant industry sectors.
       (b) Duties.--The advisory group established under 
     subsection (a) shall--
       (1) examine and make recommendations of best practices for 
     valuation of intangibles in order to--
       (A) provide investors with an improved method for assessing 
     the impact intangibles have on the accuracy of a company's 
     financial picture; and
       (B) support industry trade associations in efforts to adopt 
     guidelines for intangibles appropriate to particular industry 
     sections; and
       (2) submit to the Secretary of the Treasury a 
     recommendation regarding whether a litigation safe harbor 
     should be established for those companies that make good 
     faith estimates regarding the value of intangibles under the 
     best practice standards developed under paragraph (1).
       (c) Research Network.--The Secretary of Commerce shall 
     establish a research network of industry and academic 
     expertise to study metrics and solutions for intangible 
     disclosure, and provide such research results to the advisory 
     group.
       (d) Accounting Standards.--The Secretary of the Treasury 
     and the advisory group shall encourage the Financial 
     Accounting Standards Board to reinstate its project on 
     disclosure of information about intangible assets not 
     recognized in financial statements and to move expeditiously 
     toward issuance of a statement of financial accounting 
     standards concerning valuation and disclosure of key 
     intangible assets.
       (e) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the advisory group shall submit to the 
     Secretary of the Treasury the results of the examination 
     under subsection (b)(1) and the recommendation under 
     subsection (b)(2).

                TITLE IV--DEPARTMENT OF DEFENSE MATTERS

               Subtitle A--Defense Research and Education

     SEC. 401. REVITALIZATION OF FRONTIER AND MULTIDISCIPLINARY 
                   RESEARCH.

       It shall be the goal of the Department of Defense to 
     allocate at least 3 percent of the total Department of 
     Defense budget to science and technology. Of this amount, it 
     shall be the goal of the Department of Defense to allocate at 
     least 20 percent to basic research.

     SEC. 402. ENHANCEMENT OF EDUCATION.

       (a) Science, Mathematics, and Research for Transformation 
     (SMART) Scholarships.--
       (1) Extension of program.--Section 1105(a)(2) of the Ronald 
     W. Reagan National Defense Authorization Act for Fiscal Year 
     2005 (Public Law 108-375; 118 Stat. 2074; 10 U.S.C. 2192 
     note) is amended by striking ``for three years beginning on 
     the date of the enactment of this Act'' and inserting 
     ``through September 30, 2011''.
       (2) Expansion of program.--The Secretary of Defense shall, 
     utilizing amounts authorized to be appropriated by paragraph 
     (3), increase the number of participants in the Science, 
     Mathematics, and Research for Transformation (SMART) Defense 
     Scholarship Pilot Program under section 1105 of the Ronald W. 
     Reagan National Defense Authorization Act for Fiscal Year 
     2005 in each of fiscal years 2007 through 2011--
       (A) by an additional 160 participants pursuing doctoral 
     degrees in each such fiscal year; and
       (B) by an additional 60 participants pursuing masters 
     degrees in each such fiscal year.
       (3) Authorization of appropriations.--There is hereby 
     authorized to be appropriated to the Department of Defense 
     for each of fiscal years 2007 through 2011 the amount of 
     $41,300,000 for purposes of carrying out this subsection, of 
     which--
       (A) $36,000,000 shall be available in each such fiscal year 
     for additional participants in the Science, Mathematics, and 
     Research for Transformation (SMART) Defense Scholarship Pilot 
     Program who are pursuing doctoral degrees under paragraph 
     (2)(A); and
       (A) $5,300,000 shall be available in each such fiscal year 
     for additional participants in the Science, Mathematics, and 
     Research for Transformation (SMART) Defense Scholarship Pilot 
     Program who are pursuing masters degrees under paragraph 
     (2)(B).
       (b) National Defense Science and Engineering Graduate 
     Fellowships.--

[[Page S13669]]

       (1) Expansion of program.--The Secretary of Defense shall, 
     utilizing amounts authorized to be appropriated by paragraph 
     (2), increase the number of participants in the National 
     Defense Science and Engineering Graduate (NDSEG) fellowship 
     program in each of fiscal years 2007 through 2011 by an 
     additional 200 participants in each such fiscal year.
       (2) Authorization of appropriations.--There is hereby 
     authorized to be appropriated to the Department of Defense 
     for each of fiscal years 2007 through 2011 the amount of 
     $45,000,000 for purposes of carrying out this subsection.
       (c) Institution-Based Traineeships.--
       (1) Program required.--The Secretary of Defense shall, 
     utilizing amounts authorized to be appropriated by paragraph 
     (4), carry out a program to award, on a competitive basis, 
     traineeships to undergraduate and graduate students at 
     institutions of higher education in order to permit such 
     students to pursue studies in areas of importance to the 
     Department of Defense in mathematics, science, or engineering 
     in settings or programs that provide such students exposure 
     to multidisciplinary studies, innovation-oriented studies, 
     and academic, private-sector, or government laboratories and 
     research. It shall be the goal of the traineeship program for 
     a trainee to work for the Department of Defense for 10 years 
     after completing his or her degree.
       (2) Participants.--In each of fiscal years 2007 through 
     2011, the number of participants in the program required by 
     paragraph (1) shall be as follows:
       (A) Not more than 30 participants pursuing doctoral 
     degrees.
       (B) Not more than 30 participants pursuing masters degrees.
       (C) Not more than 20 participants pursuing undergraduate 
     degrees.
       (3) Annual reports.--Not later than November 30 each year, 
     the Secretary of Defense shall submit to the Committees on 
     Armed Services of the Senate and the House of Representatives 
     a report on the carrying out of the program required by 
     paragraph (1) during the preceding fiscal year. The report 
     shall describe the participants, and the studies pursued by 
     such participants, in the program during the fiscal year 
     covered by the report, and shall include an assessment of the 
     benefits of the program to the Department of Defense.
       (4) Authorization of appropriations.--There is hereby 
     authorized to be appropriated to the Department of Defense 
     for each of fiscal years 2007 through 2011 the amount of 
     $11,100,000 for purposes of carrying out the program required 
     by this subsection, of which--
       (A) $7,000,000 shall be available in each such fiscal year 
     for participants in the program who are pursuing doctoral 
     degrees under paragraph (2)(A);
       (B) $2,600,000 shall be available in each such fiscal year 
     for participants in the program who are pursuing masters 
     degrees under paragraph (2)(B); and
       (C) $1,500,000 shall be available in each such fiscal year 
     for participants in the program who are pursuing 
     undergraduate degrees under paragraph (2)(C).

               Subtitle B--Defense Advanced Manufacturing

     SEC. 411. MANUFACTURING RESEARCH AND DEVELOPMENT.

       (a) Identification of Enhanced Processes and 
     Technologies.--The Under Secretary of Defense for 
     Acquisition, Technology, and Logistics, acting through the 
     Director of Defense Research and Engineering, shall identify 
     advanced manufacturing processes and technologies whose 
     utilization will achieve significant productivity and 
     efficiency gains in the defense manufacturing base.
       (b) Research and Development.--The Under Secretary shall 
     undertake research and development on processes and 
     technologies identified under subsection (a) that addresses, 
     in particular--
       (1) innovative manufacturing processes and advanced 
     technologies; and
       (2) the creation of extended production enterprises using 
     information technology and new business models.
       (c) Defense Priorities.--In undertaking research and 
     development under subsection (b), the Under Secretary shall 
     consider defense priorities established in the most current 
     Joint Warfighting Science and Technology Plan.

     SEC. 412. TRANSITION OF TRANSFORMATIONAL MANUFACTURING 
                   PROCESSES AND TECHNOLOGIES TO THE DEFENSE 
                   MANUFACTURING BASE.

       (a) Acceleration of Transition from Science and 
     Technology.--
       (1) In general.--The Under Secretary of Defense for 
     Acquisition, Technology, and Logistics shall undertake 
     appropriate actions to accelerate the transition of 
     transformational manufacturing technologies and processes 
     (including processes and technologies identified under 
     section 411) from the research stage to utilization by 
     manufacturers in the defense manufacturing base.
       (2) Execution.--The actions undertaken under paragraph (1) 
     shall include a memorandum of understanding among the 
     Director of Defense Research and Engineering, other 
     appropriate elements of the Department of Defense, and the 
     Joint Defense Manufacturing Technology Panel to accelerate 
     the transition of technologies and processes as described in 
     that paragraph.
       (b) Prototypes and Test Beds.--
       (1) In general.--The Under Secretary shall, utilizing the 
     Manufacturing Technology Program, undertake the development 
     of prototypes and test beds to promote the purposes of this 
     section.
       (2) Coordination of activities.--The Under Secretary shall 
     coordinate activities under this subsection with activities 
     under the Small Business Innovation Research Program and the 
     Small Business Technology Transfer Program.
       (c) Development of Improvement Process.--The Under 
     Secretary shall, in consultation with persons and 
     organizations in the defense manufacturing base, develop and 
     implement a program to continuously identify and utilize 
     improvements and innovative processes in appropriate defense 
     acquisition programs and by manufacturers in the defense 
     manufacturing base.
       (d) Diffusion of Enhancements Into Defense Manufacturing 
     Base.--The Under Secretary shall ensure the utilization in 
     industry of enhancements in productivity and efficiency 
     identified by reason of activities under this subtitle 
     through the following:
       (1) Research and development activities under the 
     Manufacturing Technology Program, including the establishment 
     of public-private partnerships.
       (2) Outreach through the Manufacturing Extension 
     Partnership Program under memoranda of agreement, cooperative 
     programs, and other appropriate arrangements.
       (3) Coordination with activities under such other current 
     programs for the dissemination of manufacturing technology as 
     the Under Secretary considers appropriate.
       (4) Identification of incentives for contractors in the 
     defense manufacturing base to incorporate and utilize 
     manufacturing enhancements in manufacturing activities.

     SEC. 413. MANUFACTURING TECHNOLOGY STRATEGIES.

       (a) In General.--The Under Secretary of Defense for 
     Acquisition, Technology, and Logistics may--
       (1) identify an area of technology where the development of 
     industry-prepared roadmaps for new manufacturing and 
     technology processes applicable to defense manufacturing 
     requirements would be beneficial to the Department of 
     Defense; and
       (2) establish a task force, and act in cooperation with the 
     private sector, to map the strategy for the development of 
     manufacturing processes and technologies needed to support 
     technology development in the area identified under paragraph 
     (1).
       (b) Commencement of Roadmapping.--The Under Secretary shall 
     commence any roadmapping identified pursuant to subsection 
     (a)(1) not later than January 2007.

     SEC. 414. PLANNING FOR ADOPTION OF STRATEGIC INNOVATION.

       (a) In General.--The Secretary of Defense, acting through 
     the Under Secretary of Defense for Acquisition, Technology, 
     and Logistics, shall ensure that each contract of a value of 
     $50,000,000 or more under a technology or logistics program 
     of the Department of Defense includes requirements for 
     planning by the contractor under such contract for the 
     adoption of innovative technologies under such contract.
       (b) Particular Requirements.--The requirements included in 
     a contract under subsection (a) shall include--
       (1) requirements for plans for the identification, 
     monitoring, and transition to the utilization under such 
     contract of applicable emerging technologies from the private 
     sector;
       (2) requirements for plans for the identification, 
     monitoring, and development under such contract of emerging 
     research initiatives in academia; and
       (3) a requirement to submit to the Under Secretary on an 
     annual basis a report on the implementation of the planning 
     carried out pursuant to the requirements included in such 
     contract.

     SEC. 415. REPORT.

       (a) In General.--Not later than December 31, 2008, the 
     Under Secretary of Defense for Acquisition, Technology, and 
     Logistics shall submit to the congressional defense 
     committees a report on the actions undertaken by the Under 
     Secretary under this subtitle during fiscal year 2007.
       (b) Elements.--The report under subsection (a) shall 
     include--
       (1) a comprehensive description of the actions undertaken 
     under this subtitle during fiscal year 2007;
       (2) an assessment of effectiveness of such actions in 
     enhancing research and development on manufacturing 
     technologies and processes, and the implementation of such 
     technologies and processes within the defense manufacturing 
     base; and
       (3) such recommendations as the Under Secretary considers 
     appropriate for additional actions to be undertaken in order 
     to increase the effectiveness of the actions undertaken under 
     this subtitle in enhancing manufacturing activities within 
     the defense manufacturing base.

     SEC. 416. AUTHORIZATION OF APPROPRIATIONS.

       Funds are hereby authorized to be appropriated for the 
     Department of Defense for purposes of carrying out this 
     subtitle for fiscal years as follows:
       (1) For fiscal year 2007, $20,000,000.
       (2) For fiscal year 2008, $40,000,000.
       (3) For fiscal year 2009, $60,000,000.
       (4) For fiscal year 2010, $80,000,000.
       (5) For fiscal year 2011, $100,000,000.

                  TITLE V--JUDICIARY AND OTHER MATTERS

     SEC. 501. SENSE OF CONGRESS ON RETAINING HIGH TECH TALENT IN 
                   THE UNITED STATES.

       It is the sense of Congress that comprehensive immigration 
     reform should ensure that

[[Page S13670]]

     the United States retains foreign-born high-tech talent 
     educated in the United States and remains the leader in 
     innovation and technological development in an emerging 
     global marketplace. Such comprehensive reform should ensure--
       (1) that the United States continues to retain foreign 
     nationals who have received master's or higher degrees in the 
     sciences, technology, engineering or mathematics from United 
     States institutions of higher education under either--
       (A) the H-1B visa program; or
       (B) as employment-based immigrants;
       (2) that the United States must take a forward looking 
     approach with respect to any limitations on the H-1B visa 
     program; and
       (3) that immigration reform should also include systematic 
     improvements to the Government's technology infrastructure in 
     order to eliminate delays in processing immigration 
     proceedings, including employment-based visa applications.

     SEC. 502. STUDY ON BARRIERS TO INNOVATION.

       (a) In General.--The National Academy of Sciences shall 
     conduct and complete a study to identify, and to review 
     methods to mitigate, new forms of risk for businesses beyond 
     conventional operational and financial risk that affect the 
     ability to innovate, including studying and reviewing--
       (1) incentive and compensation structures that could 
     effectively encourage long-term value creation and 
     innovation;
       (2) methods of voluntary and supplemental disclosure by 
     industry of intellectual capital, innovation performance, and 
     indicators of future valuation;
       (3) means by which government could work with industry to 
     enhance the legal and regulatory framework to encourage the 
     disclosures described in paragraph (2);
       (4) practices that may be significant deterrents to United 
     States businesses engaging in innovation risk-taking compared 
     to foreign competitors, including tort litigation, the nature 
     and extent of any resulting defensive management practices, 
     and recommendations on practices to restore innovation risk-
     taking and to overcome defensive practices;
       (5) means by which industry, trade associations, and 
     universities could collaborate to support research on 
     management practices and methodologies for assessing the 
     value and risks of longer term innovation strategies; and
       (6) means to encourage new, open, and collaborative 
     dialogue between industry associations, regulatory 
     authorities, management, shareholders, and other concerned 
     interests to encourage appropriate approaches to innovation 
     risk-taking.
       (b) Report Required.--The National Academy of Sciences 
     shall, not later than 1 year after the date of enactment of 
     this Act, submit to Congress a report on the study conducted 
     under subsection (a).
       (c) Authorizations of Appropriations.--There are authorized 
     to be appropriated to the National Academy of Sciences 
     $1,000,000 for fiscal year 2007 for the purpose of carrying 
     out the study required under this section.

     SEC. 503. SENSE OF CONGRESS ON PATENT REFORM.

       It is the sense of Congress that--
       (1) to bolster the United States economy and strengthen 
     innovators in the United States, the patent system should be 
     reformed to enhance the quality of patents, to leverage 
     patent databases as innovation tools, and to create best 
     practices for global collaborative standard setting; and
       (2) to achieve the objectives described in paragraph (1), 
     the Federal Government should--
       (A) fully fund the Patent and Trademark Office and enable 
     the Office to direct its fees to fund process improvements;
       (B) improve compliance with existing patenting requirements 
     and create incentives for improved search and disclosure of 
     prior art;
       (C) create new standards for searchability of patent 
     applications and new patents;
       (D) establish a fair and balanced post-grant patent review 
     procedure for future patents and patent applications;
       (E) invest in retroactively creating searchable keywords 
     for a subset of the most highly cited historical patents;
       (F) secure reciprocal access to foreign patent databases; 
     and
       (G) set best practices and processes for standards bodies 
     to align incentives for collaborative standard setting, and 
     to encourage broad participation.
  Mr. LIEBERMAN. Mr. President, today I rise with my colleague Senator 
Ensign to introduce the National Innovation Act, S. 2105. This Act is 
about building a new century of progress and prosperity for our Nation 
by spurring a new wave of American innovation--better known around the 
world as ``American ingenuity.''
  Our Nation was founded by innovators. Washington, Jefferson, Franklin 
and many of our other Founding Fathers not only created a new republic, 
but in their spare time were inveterate experimenters and inventors, as 
well, who believed that innovation would be important to the growth and 
security of their new nation.
  The generations that followed took up the call. Whitney, Bell, 
Edison, Fulton, Morse, Ford, Colt, the Wrights--I don't even have to 
say their first names and you know who they are and what they did.
  Now we face a new century with new challenges--a global age where 
competition can come as easily from across an ocean as from across the 
street. We got a wake up call earlier this week about how tough the 
challenge is when it was announced that China had overtaken the United 
States as the world's largest exporter of high-tech products. According 
to statistics released by the Organization for Economic Cooperation and 
Development (OECD), China shipped $180 billion worth of such goods 
worldwide last year, exceeding U.S. exports valued at $149 billion. 
Even more significant, however, is the fact that the historical 
paradigm, one that has fueled much of our economic growth in the 
technology sector in this country, is quickly changing. China now 
imports far fewer components for tech goods, choosing instead to 
produce them itself. The OECD noted that between 2000 and 2004, the 
U.S. and EU shares of China's total imports in such components dropped 
from 27 to 12 percent. Instead of relying solely on its lower labor and 
production costs to assemble high-tech goods from components produced 
in places like the United States and Europe, China increasingly does it 
all itself now. Chinese scientists now develop many of the newest 
technologies. Their engineers now design the latest cutting-edge 
products, and their factories continue to assemble and spit out the 
goods, all the while steadily lowering costs. Many of the people 
involved are educated here or in Europe, though even that is changing, 
in part due to our restrictive immigration policies and technology 
transfer rules. If this continues unabated, the highest-end and best-
paying jobs, key to the innovation-driven economy, could be found in 
Shanghai and not in American tech centers.
  In May of 2004, I released a White Paper on the topic of outsourcing. 
When I issued that White Paper, I stated that the first thing we should 
do was to stop blaming others and face the hard facts ourselves. Since 
that time, there are even more hard facts we need to face, including 
the statistics I just mentioned, all of which point to the urgent need 
for action if the American economy is going to adapt to the fundamental 
changes and growing competition in the global economy. Forrester 
Research Inc., a Cambridge, MA research firm that has been studying 
this issue, has estimated that by 2015, 3.3 million high-tech and 
service industry jobs will move overseas. Deloitte Consulting has 
estimated that approximately 2 million jobs in the financial services 
sector, which signifies nearly 15 percent of the industry's total, 
could move overseas in the next five years. But even more importantly, 
we are not just losing jobs. I fear we are beginning to lose critical 
pieces of our innovation infrastructure, and with them, our competitive 
edge in the global marketplace. What we always believed was our 
nation's ultimate competitive advantage--our high-end R&D and 
technological prowess--is increasingly under siege. I said in 2004, the 
outsourcing of jobs is just the tip of an economic iceberg that America 
is sailing towards. If the most recent statistics tell us anything, 
it's that we are even closer to that iceberg than ever before.
  Luckily, these developments have not gone unnoticed. Earlier this 
year, the Council on Competitiveness--drawing on the insights of many 
experts from industry and academia, and led by Sam Palmisano of IBM and 
Wayne Clough of Georgia Tech University--circulated a report with 
detailed recommendations on how to reinvigorate our innovation economy. 
The National Innovation Act, which Senator Ensign and I are introducing 
today, is based on the Council's recommendations. This is a strongly 
bipartisan bill, cosponsored by 16 of our colleagues in the Senate. 
Further, this bill is wholeheartedly supported by members of the 
business and academic communities in this country, many of whom are 
eager to see a reinvigoration of American ingenuity. A few exmples of 
these supportive statements include the following: George Scalise, 
President, Semiconductor Industry Association: ``U.S. leadership in 
technology has been the cornerstone of America's

[[Page S13671]]

strategies for driving economic growth and ensuring national security. 
U.S. leadership is being challenged as never before. The National 
Innovation Act of 2005 addresses a number of the most critical issues 
involving technology leadership, especially those related to federal 
support for basic research. . . . We are especially pleased to support 
a bipartisan approach to ensuring U.S. technology leadership. The 
issues at stake--national security and our standard of living in the 
21st century--are far too important to become entangled in partisan 
politics.''
  Nicholas M. Donofrio, Executive Vice President, IBM Corporation: 
``IBM applauds the introduction of the National Innovation Act of 2005 
. . . Innovation underpins American economic growth and national 
security. In today's era of global opportunity and change, the rewards 
flow to those who innovate and turn disruptive shifts to their 
advantage. America has a long, proud history of recognizing when change 
is required and rising to the challenge. We are at such an inflection 
point today. The National Innovation Act of 2005 will create synergies 
among America's academic, business and government communities to ensure 
the future growth of the United States. I urge all Senators to support 
this legislation.''
  Deborah L. Wince-Smith, President, Council on Competitiveness: ``On 
behalf of the Council's 180 CEOs, university presidents and labor 
leaders, I applaud the Senators' efforts and desire to ensure the 
United States remains the most competitive economic power in the world. 
We must, as a nation, innovate to compete and to prosper. This 
legislation is a critical step forward towards that goal.''
  Dave McCurdy, CEO, Electronic Industries Association: ``EIA is 
thrilled by today's introduction of the National Innovation Act of 2005 
(NIA), which includes so many measures that can help the U.S. remain an 
economic leader in the global high-tech economy. It is an ambitious 
piece of legislation that spans the policy spectrum, but with the 
commitment and support of policymakers from both sides of the aisle, we 
hope to see these important provisions quickly begin to take effect and 
fuel the U.S. innovation engine.''
  John J. Castellani, President, Business Roundtable: ``On behalf of 
Business Roundtable, an association of 160 chief executive officers of 
America's leading companies, I applaud Senator Ensign and Senator 
Lieberman for their leadership on this critical issue. Maintaining our 
competitive edge in today's world economy is a top priority of the 
business community, and the National Innovation Act of 2005 is an 
important step in the right direction.''

  The list of organizations and companies that have already endorsed 
this bill includes many of the major players in the field, companies 
and organizations working to keep America at the cutting edge of 
technology development, including the following: American Chemical 
Society, American Mathematical Society, ASTRA (Alliance for Science & 
Technology Research in America), Athena Alliance, Bell South, Business 
Roundtable, Center for Accelerating Innovation, Computing Research 
Association, Council on Competitiveness, Council of Scientific Society 
Presidents, Electronic Industries Alliance, Federation of American 
Scientists, IBM, IEEEE-USA, Progressive Policy Institute, Semiconductor 
Industry Association, SEMI North America, and TechNet. In addition, 
many academic institutions and organizations support our bill because 
they recognize the importance of expanding education in science, math, 
and engineering. We have received strong indications of support from 
the academic community, including the Association of American 
Universities (AAU), the Council of Graduate Schools (CGS) and Georgia 
Institute of Technology.
  While I won't describe every provision of this far-reaching bill 
today, a section-by-section summary accompanies this statement in the 
Record, I will say that the National Innovation Act addresses three 
broad categories--talent, investment, and infrastructure--all of which 
are key to America's regaining our competitive position among our 
trading partners.
  Number one, Talent: Innovation requires the incubation of curious 
minds. That means we absolutely must educate and train our science and 
engineering talent base that is essential to our continued global 
economic leadership.
  The number of jobs that require technical training is increasing at 
five times the rate of other occupations. To encourage more students to 
enter these technical professions, our legislation increases Federal 
support for graduate fellowships and trainee programs in science, math, 
and engineering by more than $800 million over 5 years. Specifically, 
the legislation expands the National Science Foundation's (NSF) 
Graduate Research Fellowship Program by 1,250 fellowships and extends 
the length of each fellowship from 3 to 5 years. These fellowships are 
portable fellowships which afford students the greatest flexibility in 
choosing graduate programs that fit their needs and interests. The 
legislation also expands the NSF Integrated Graduate Education and 
Research Traineeship (IGERT) program by 1,250 new traineeships. In the 
IGERT program, grants are awarded to universities to develop cross-
disciplinary training programs for students in areas including science, 
math, engineering, and policy.
  The legislation also expands upon existing Department of Defense 
efforts and creates new programs in order to encourage more students to 
enter the fields of science, math, and engineering. Specifically, 
provisions are included to expand the Defense Department Science, 
Mathematics, and Research for Transformation (SMART) scholarship 
program by $41.3 million per year over five years and to expand the 
National Defense Science and Engineering Graduate Fellowship program by 
$45 million per year over five years. A new competitive traineeship 
program, which will initially include 80 students, is created to 
provide interdisciplinary training in science and engineering to 
students who are encouraged to work for at least ten years in the 
Department of Defense after graduation.

  This legislation also supports new and existing Professional Science 
Master's degree programs. These Master's programs typically try to 
provide cross-disciplinary training within the science, math, and 
engineering disciplines, and also to couple traditional technical 
disciplines with business, entrepreneurial, and business law training. 
Graduates of these programs will comprise a cadre of technical 
professionals with broad skills in both business and science that will 
give our industry an edge.
  If we are to develop talent at the graduate levels, we must also 
emphasize science, math, and engineering at the K-12 and undergraduate 
levels. The results from the International Student Assessment of 2003 
showed that U.S. 15-year-olds performed below the international average 
in math and science literacy. In order to bolster our highly-skilled 
science and engineering workforce, we must improve performance in our 
elementary, middle, and high schools.
  Recognizing that new approaches must be realized, this legislation 
establishes a grant program of $10 million in 2007 and $20 million in 
2008 and 2009 to help primary and secondary schools develop new 
experientially-based teaching techniques in math and science. It 
further addresses the issue of improving talent in scientific 
disciplines by expanding the existing Technology Talent program to the 
scope originally intended. The Technology Talent program provides 
competitive grants to undergraduate universities to develop new methods 
of increasing the number of students earning degrees in science, math, 
and engineering. It is essential that we increase the number of college 
graduates with the skills to contribute to the science and technology 
workforce, yet this program has never been fully funded.
  Number two, Investment: Great ideas need research money if they are 
to move from imagination to market. But, federal R&D spending as a 
percentage of GDP has been in steady decline since the mid-1960s. It is 
less than half of what it was then. This bill bolsters the mission of 
the National Science Foundation (NSF) by more than doubling its 
research budget from $4.8 billion in 2004 to nearly $10 billion in 
2011. Support for NSF is essential as it funds the full range of 
scientific disciplines and it encourages multidisciplinary approaches 
to problem solving. When it was created in 1950, Congress envisioned 
NSF as one of the primary catalysts for research ``to promote the 
progress of science; to advance the national health, prosperity, and 
welfare; [and] to secure the national defense.'' In order for NSF to 
continue to meet our tremendous needs in all these areas, which notably 
remain as vital today as they did back then, it needs more funding. At 
the same time, we must recognize that we, as a country,

[[Page S13672]]

face difficult choices in how we allocate our resources. Hard choices 
may have to be made, but we cannot avoid the reality that an investment 
such as the increase in NSF's research budget that our bill calls for 
today, is absolutely necessary if we are to generate the talent base we 
need to remain competitive. It is my belief that this investment will 
pay vast dividends in the long run for the American people and for the 
American economy. I also believe we will pay dearly if this investment 
is not made soon.
  Congress is making steady progress toward finding reasonable ways to 
accommodate the needs of our five major research agencies. Our bill 
concentrates on two agencies: we double the authorization for NSF and 
we ask the Department of Defense (DOD) to spend 3 percent of its budget 
on science and technology, DOD's 6.1, 6.2, and 6.3, programs consistent 
with Defense Science Board recommendations. The research budget for 
life sciences at the National Institutes of Health (NIH) has been 
doubled in recent years and this legislation attempts to bring research 
in the physical sciences up to the same high level of funding. A major 
increase for NASA science research is now under consideration in 
conference and the Congress passed a significant increase in the 
authorization for Energy Department Science research as part of the 
energy bill this summer. So, our bill addresses the remaining top R&D 
agencies--NSF and DOD.
  Our bill also creates an ``Innovation Acceleration Grants'' program 
to stimulate high-risk research by urging federal research agencies to 
allocate at least 3 percent of their current R&D budget to breakthrough 
research--the kind of research that gave us fiber optics, the Internet 
and countless other technologies relied on every day in this country 
and around the world. We anticipate this funding would be used for 
``grand challenges,'' for what is sometimes referred to as 
``connected'' or ``translational'' research, which moves from 
fundamental discoveries through the development and procurement stages. 
We also anticipate that agencies would step outside the peer review 
approach, which can be too cautious, and empower talented program 
managers to drive novel and promising ideas forward. While it doesn't 
mandate that these agencies spend at least 3 percent of their budgets 
on high-risk frontier research projects, this provision sets a 
realistic and reasonable strategic goal. It is our hope and expectation 
that agencies will view the 3 percent allocation as a starting point 
and will take the initiative to expand from there. The Innovation 
Acceleration Grants program is designed to be a streamlined mechanism 
to support those grants that are making progress and not support those 
that are floundering. The program has built-in and specially-designed 
metrics to ensure that granting agencies closely monitor the projects 
they support, renewing those with strong performance and phasing out 
those that don't show enough real promise for the types of cutting-edge 
advancements that are truly innovative. It is important that it is 
designed in this manner because a cautious approach to these issues 
cannot work. In order to face the challenge, we need to take risks and 
be patient. However, in an environment of increasingly tight fiscal 
pressures, we also must recognize that risk taking can, and often does, 
lead to dead ends. While many high-risk projects may fail, those that 
succeed can bring tremendous benefit. The urgency of the threats we 
face today warrants a balanced approach. We must continue to encourage 
the groundbreaking experimentation, tinkering and longer-term outlook 
that made this country great. But we also must continue to take stock 
of our progress and make sure we are heading toward the ultimate goal 
of reestablishing the foundational elements of our tremendous successes 
over the last 50 years, and more.

  Switching gears briefly, I think it is also important to note that 
the government cannot do this alone. The private sector in this country 
needs to continue to lead the charge. Private sector investment in 
research in this country, after a sharp rise in the 90's, has been 
eroding in recent years in part because companies have moved some R&D 
operations outside the United States. About $17 billion a year in R&D 
now flows overseas to nations like China and India. And as that 
research money leaves our shores, the high-skilled 21st century jobs we 
need to compete sail away with them.
  Our bill tries to help stem the tide by making the current Research 
and Experimentation (R&E) tax credit permanent and extending it to a 
greater number of enterprises; the same provision that appears in the 
Invest in America Act of 2005, sponsored by Senators Hatch and Baucus 
with 44 bipartisan cosponsors. These two Senators deserve the credit on 
this. We are simply trying to emphasize their efforts. Making the 
credit permanent allows our private entrepreneurial spirit to continue 
to drive the economic growth of this great nation and at the same time 
ensures that other countries like China do not lure away our talent and 
investment, and ultimately the innovation that comes from them. It 
gives our companies a powerful and reliable long-term incentive to 
include domestic R&D as a significant component of their strategic 
plans. Since the original enactment of the research credit in 1981, a 
public-private partnership has developed, through which the federal 
government has worked with businesses of all sizes to ensure that 
research expenditures continue to be made here in the United States. 
The reward has been the creation of many innovative technologies, well-
paying jobs, and an increased growth rate in our economy. The 
importance of this effort cannot be understated.
  At the same time that firms are investing more money in R&D, they 
must improve their ability to manage the technological innovations that 
result from this research. The emerging area of ``service science'' 
refers to both research and training regimens that are now starting to 
develop and to teach individuals how to apply technology to solving 
complex problems in the service and industrial sector. Eighty percent 
of our economy is service-based, yet we do very little R&D in this 
area. We now face intense service competition from countries like 
India, taking advantage of global IT systems. If we don't improve our 
services productivity, increasingly we won't be able to compete. This 
legislation asks the Director of the National Science Foundation to 
conduct a study for Congress on how the federal government should best 
support service science through research, education, and training.
  Number three, Infrastructure: Once we have helped assure the 
education foundation to give people the basic skills they need to use 
their creativity, and the resources they need to support their 
experimentation, we must then reinvent and transform our manufacturing 
processes and technologies so that we can secure the gains from the 
fruits of all this labor. In this era of tough international 
competition, if we don't manufacture the goods we innovate here in the 
U.S., we will forfeit our global economic leadership and our children's 
prosperity to other nations who can. To help facilitate this important 
goal, our legislation takes several steps.
  First, the bill authorizes creates federally-funded and complementary 
advanced manufacturing programs at the Departments of Commerce and 
Defense. The development and implementation of state-of-the-art 
advanced manufacturing systems does not happen overnight, nor can it be 
done alone. The goal of this new program is to, again, establish a 
public-private R&D partnership which enables risk taking and creativity 
to generate new processes and technologies. These new processes and 
technologies will give us the productivity breakthroughs we need to 
maintain our manufacturing competitiveness. I continue to believe in 
the spirit of American ingenuity--if given the chance and the tools to 
succeed, we will. This legislation also creates the Test Beds of 
Excellence program, which is designed test and refine these new 
processes and technologies in a real manufacturing setting once they 
have been developed. Then, we ask the Manufacturing Extension Program 
to help disseminate this new innovative knowledge throughout to 
manufacturing base, including to the many small and mid-sized companies 
that will be key to our growth. The Test Beds program is a competitive 
one and, as in the case of the Innovation Acceleration Grants program 
and other important features of this legislation, it

[[Page S13673]]

is designed to self-scrutinize and adapt to the constantly changing 
needs of our manufacturing sector.
  In addition to the effort at the Department of Commerce, our bill 
asks the Department of Defense to work with the private sector to 
identify and accelerate the transition of advanced manufacturing 
technologies and processes that will enable us to maintain our 
technological edge on the battlefield. The Department of Defense relies 
on innovation, and the bill seeks to expand the Department's 
traditional manufacturing sector work in this area. An additional 
motivating factor within the Department of Defense is the inherent 
security risk associated with using certain overseas suppliers. 
American manufacturing must remain competitive in order to meet the 
needs of our military in a timely fashion.

  These steps will go a long way toward revitalizing our manufacturing 
system into a system that is seamlessly integrated with our other 
efforts to boost American innovation through education and research.
  Our bill goes further, recognizing that innovation fundamentally 
occurs not at the national level, but at the local and regional levels. 
Certainly there are many lessons to be learned from the rise of Silicon 
Valley and other similar regions that have sprung up all over this 
country as centers for high-tech growth. Our competitors, China, India, 
Israel and many others, have already begun to emulate the success we 
have achieved in this way. These clusters have developed in areas of 
the country where educational and research institutions, together with 
creative elements of the private sector, have partnered to create an 
environment conducive to innovation. Our bill encourages the 
development of more regional clusters (``hot spots'') of technology 
innovation throughout the United States. These hot spots spur growth in 
local economies and also contribute to progress on a national scale. We 
don't try to impose these from above, from the national level. These 
must start at the local level to work. But, the federal government can 
help local communities identify successful models and the right 
metrics. The Secretary of Commerce will publish a ``Guide to Developing 
Successful Regional Innovation Hot Spots'' in order to share successful 
strategies in the formation and development of regional clusters.
  Finally, it is imperative that the executive branch take a strong 
role in leading and coordinating the broad initiative outlined in this 
legislation. To help guide progress in all three of the important areas 
I have outlined, this bill creates a President's Council on Innovation. 
The goal of the President's Council is to develop a comprehensive 
national innovation agenda and coordinate all federal efforts related 
to this agenda. In consultation with the Office of Management and 
Budget, this Council would develop and use metrics to assess the impact 
of existing and proposed laws that affect innovation in the United 
States. In addition, the Council would help to coordinate the various 
federal efforts that must be spread among many agencies that support 
innovation, and it would submit an annual report to the President and 
to the Congress on how the Federal Government can best support 
innovation. This effort cries out for much better coordination and 
collaboration than exist now. Why the White House? These issues must be 
addressed at the highest levels and in a decisive and organized way to 
achieve success.
  The National Innovation Act is organized into five titles, 
intentionally reflecting the Senate committees of jurisdiction in the 
subject areas of each title. Title I, ``Innovation Promotion'' falls 
within the purview of the Commerce Committee. Title II, dealing with 
science, education and healthcare programs, covers subjects within the 
jurisdiction of the Health Education Labor and Pensions Committee. 
Title III, providing tax incentives to promote innovation, comes within 
the Finance Committee jurisdiction. Title IV covers Department of 
Defense programs and would fall within the Armed Services Committee 
jurisdiction. Title V, which touches on immigration, patent reform, and 
possible barriers to innovation, would be within the Judiciary 
Committee purview. The issues of immigration, health care information 
technology, and patent reform are reflected in this bill as Sense of 
Congress provisions, because we recognize that the committees of 
jurisdiction are already working on and moving in these areas and we 
don't want to get in their way. However, the bill cites these moving 
issues to mark the importance of considering how legislation on these 
issues may affect our economy's ability to remain competitive. The 
provision for an objective National Academy study on barriers to 
innovation would allow Congress to understand how legal and numerous 
other structural aspects of the U.S. economy may affect our ability to 
be innovative.
  From the 18th century Franklin stove to the 20th century personal 
computer, the United States has long been the leader in the technology 
and innovation that created jobs, wealth, and an ever-increasing 
standard of living for our people. We call it American ingenuity. It's 
time to take that native ingenuity and build a new century of progress 
for America.
  I ask unanimous consent that a section-by-section analysis of the 
National Innovation Act, a short summary of the legislation, and 
statements of support for this legislation be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

      National Innovation Act of 2005 Section-by-Section Analysis

                     TITLE I--INNOVATION PROMOTION

     Sec. 101. President's Council on Innovation
       The President shall create a Council on Innovation 
     comprised of heads of various executive agencies including 
     Commerce, Defense, Education, Energy, and others. The 
     Council, which will be chaired by the Secretary of Commerce, 
     will have oversight over legislative proposals and executive 
     branch initiatives for promoting innovation. Specifically, 
     the Council will develop a process for using metrics to 
     evaluate existing and proposed innovation policies and make 
     recommendations to heads of executive agencies on 
     improvements to innovation policies. In addition, the Council 
     shall develop a comprehensive agenda for strengthening 
     innovation among the Federal Government, states, academia, 
     and the private sector. The Council will submit an annual 
     report to the President and the Congress on its activities.
     Sec. 102. Innovation Acceleration Grants
       The President will establish the ``Innovation Acceleration 
     Grants Program'' to promote and accelerate innovation in the 
     United States. Each executive agency that currently funds 
     research and development (R&D) in science, mathematics, 
     engineering, and technology shall have a goal to commit at 
     least 3% of its existing annual R&D budget to this program. 
     Each such executive agency will also submit detailed plans 
     for the implementation and evaluation of the program within 
     the agency. The plans shall include metrics upon which grant 
     funding decisions will be made and upon which the success of 
     the grants awarded will be assessed. Grants shall be issued 
     for a maximum period of three years (with possibility of 
     renewal for another three years) and shall be awarded to 
     projects that propose a novel approach to address fundamental 
     technological challenges. The agency head may grant further 
     renewals to programs requiring an extended timeframe to 
     complete critical research to the extent they satisfy metrics 
     developed to ensure their ongoing usefulness. Granting 
     agencies are responsible for evaluation of all projects 
     sponsored and for publishing such reviews.
     Sec. 103. A national commitment to basic research
       Authorizations are provided to nearly double NSF research 
     funding from Fiscal Year 2007 through Fiscal Year 2011. 
     Within 180 days of enactment, the Director of the National 
     Science Foundation shall submit to Congress a detailed plan 
     for the use of these funds. The plan shall focus on means by 
     which basic research in science and engineering will optimize 
     the United States economy for global competition and 
     leadership in productive innovation. In addition, within one 
     year of enactment, the director of the Office of Science and 
     Technology Policy shall evaluate funding needs for R&D in 
     physical sciences and engineering in consultation with the 
     relevant agencies and departments. As appropriate, 
     recommendations for increases in such funding should be 
     submitted to Congress.
     Sec. 104. Regional economic development
       The Assistant Secretary for Economic Development of the 
     Department of Commerce shall review federal programs that 
     support local economic development and devise a strategy to 
     foster innovation within communities. The Assistant Secretary 
     is directed to develop metrics to evaluate existing programs 
     and, consistent with the strategy to foster innovation in 
     local communities, focus funding on projects that satisfy the 
     metrics developed and that best emphasize

[[Page S13674]]

     cooperation between the public and private sector to promote 
     innovation.
       In addition, within 1 year of enactment, the Secretary of 
     Commerce shall publish a ``Guide to Developing Successful 
     Regional Innovation Hot Spots.'' The Guide shall be compiled 
     by the Secretary of Commerce in consultation with 
     representatives of successful regional innovation hot spots 
     to identify features of such hot spots and recommend 
     mechanisms for forming new successful regional 
     collaborations. The Department of Commerce will also be 
     responsible for developing metrics to evaluate the efficacy 
     of the regional innovation hot spots and for providing 
     Congress with a biannual assessment of such programs. The 
     Undersecretary for Technology of the Department of Commerce 
     shall coordinate this review of hot spots.
     Sec. 105. Development of advanced manufacturing systems
       The Director of the National Institute of Standards and 
     Technology (NIST) shall support R&D efforts in the industrial 
     sector to develop innovative, state-of-the-art manufacturing 
     practices. Targeted activities include improving advanced 
     distributed and desktop manufacturing capabilities, 
     developing small lot manufacturing processes that are 
     compatible with extended production systems, and applying 
     nanotechnology to manufacturing. The Director of NIST shall 
     coordinate these activities with activities under the Small 
     Business Innovation Research Program, the Small Business 
     Technology Transfer Program, and DoD's Manufacturing 
     Technology Program.
       The NIST Director will support the development of 
     prototypes for new technologies, the testing of these 
     prototypes, and the adoption of standards to accelerate the 
     applicability of these new technologies. NIST will hold a 
     competition to select up to 3 Pilot Test Beds of Excellence 
     to execute these tasks. The Federal Government will provide 
     no more than 1/3 of the funding for each Test Bed. Private 
     sector participants and corresponding state or local 
     governments must each provide at least 1/3 of the funding for 
     each Test Bed. All Test Beds are subject to review and none 
     will receive federal funds for longer than five years.
       The NIST Director shall ensure that the Manufacturing 
     Extension Partnership (MEP) develops a focus on innovation.
       The bill would authorize a total of $300 million between FY 
     2007 and FY 2011 to execute the programs in section 105.
     Sec. 106. Study on service science
       ``Service science'' refers to training regimens that are 
     being developed to teach individuals how to apply technology 
     to solving complex problems in the industrial sector. It is 
     the sense of the Congress that the Federal Government should 
     develop a better understanding of service science as a 
     learning discipline in order to strengthen the 
     competitiveness of U.S. institutions and enterprises. The 
     Director of the National Science Foundation (NSF) shall 
     conduct a study for Congress on how the Federal Government 
     should best support service science through research, 
     education and training. During the course of this study, the 
     Director will consult with leaders from institutions of 
     higher education and from the private sector.

 TITLE II--MODERNIZATION OF SCIENCE, EDUCATION, AND HEALTHCARE PROGRAMS

                   Subtitle A--Science and Education

     Sec. 201. Graduate fellowships and graduate traineeships
       This section authorizes funding for fellowship and 
     traineeship programs that encourage students to pursue 
     graduate studies in the sciences, technology, engineering and 
     mathematics. The Director of NSF will expand the agency's 
     Graduate Research Fellowship Program by 250 fellowships per 
     year and extend the length of each fellowship to five years. 
     The bill authorizes $34 million/year for FY 2007-FY 2011 to 
     support these additional fellowships. In addition, funding in 
     the amount of $57 million/year is authorized for a similar 
     expansion of the Integrated Graduate Education and Research 
     Traineeship program by 250 new traineeships per year over 
     five years.
     Sec. 202. Professional Science Master's Degree programs
       This section encourages universities to develop 
     Professional Science Master's Degree Programs as a means of 
     increasing the number of highly skilled graduates entering 
     the science and technology workforce. The Director of NSF 
     shall establish a clearinghouse in collaboration with 
     institutions of higher learning, industries, and Federal 
     agencies in order to document successful program elements 
     used in existing Professional Science Master's Degree 
     Programs. The clearinghouse will provide an essential 
     database of information for emerging programs.
       In addition, the Director of NSF will grant awards to 4-
     year institutions of higher education for the creation or 
     improvement of Professional Science Master's Degree Programs. 
     Funds may be awarded to a maximum of 200 institutions for a 
     three year term (with possibility of renewal for 2 additional 
     years), and preference will be given to applicants that are 
     able to secure more than 2/3 of their funding from sources 
     outside the Federal Government. NSF will develop performance 
     benchmarks and will report to Congress within 180 days of 
     this process with an evaluation of all funded programs. The 
     bill authorizes $20 million for FY 2007 and such sums as may 
     be necessary to carry out the programs established in Section 
     202 for each succeeding fiscal year.
     Sec. 203. Increased support for science education through the 
         National Science Foundation
       This section supports an increased commitment to science 
     education through the Science, Mathematics, Engineering, and 
     Technology Talent expansion program authorized under section 
     8(7) of the National Science Foundation Authorization Act of 
     2002. The Tech Talent expansion program encourages American 
     universities to increase the number of graduates with degrees 
     in mathematics and science. The bill authorizes $335 million 
     from Fiscal Year 2007 to Fiscal Year 2010 for continued 
     support of this program.
     Sec. 204. Innovation-based experiential learning
       The Director of NSF shall award grants to local educational 
     agencies to implement innovation-based experiential learning 
     in 500 secondary schools and 500 elementary or middle 
     schools. Funds are authorized at levels of $10 million for 
     Fiscal Year 2007 and at $20 million/year for Fiscal Year 2008 
     and Fiscal Year 2009.

               Subtitle B--21st Century Healthcare System

     Sec. 211. Sense of the Congress regarding 21st Century 
         Healthcare System
       It is the sense of the Congress that the Federal Government 
     should encourage the adoption of interoperable health 
     information technology by facilitating the creation of 
     standards for activities such as quality reporting, 
     surveillance, epidemiology, or adverse event reporting. 
     Federal agencies or departments performing such activities 
     are urged to collect data in a manner consistent with devised 
     standards.

            TITLE III--INCENTIVES FOR ENCOURAGING INNOVATION

                      Subtitle A--Research Credits

     Sec. 301. Permanent extension of research credit
       This provision makes the research credit set forth in 
     Section 41(a) of the Internal Revenue Code permanent. The 
     credit, originally enacted in 1981, has been extended 11 
     times and is scheduled to expire on December 31, 2005. The 
     permanent tax credit should allow companies to engage more 
     easily in long-term research projects.
     Sec. 302. Increase in rates of alternative incremental credit
       This section modifies the means for calculation of the 
     elective alternative incremental research credit to increase 
     the rates applicable to such an election. The bill restores 
     the rates to range between 3% and 5%.
     Sec. 303. Alternative simplified credit for qualified 
         research expenses
       This section creates a new elective alternative simplified 
     credit for qualified research expenses to increase the number 
     of companies that can benefit from the incentive. Taxpayers 
     will be able to elect a new alternative simplified credit 
     equal to 12% of qualified research expenses for the taxable 
     year in excess of 50% of the average qualified research 
     expenses for the 3 prior taxable years.
       Firms may only select one of the two alternative credits 
     described in sections 302 and 303.
       The language in this subtitle is identical to the 
     provisions of S. 627 introduced by Senators Hatch and Baucus.

                    Subtitle B--Health and Education

     Sec. 311. Study and report on catastrophic healthcare
       This provision requires the Secretary of Health and Human 
     Services and the Secretary of Labor to jointly conduct a 
     study and submit a report to Congress regarding costs 
     associated with catastrophic healthcare events and chronic 
     disease. The goal of the study is to develop innovative 
     public and private sector approaches for dealing with such 
     events and the report should discuss approaches and 
     recommendations for administrative and legislative action to 
     minimize the financial risks associated with these events.
     Sec. 312. Lifelong learning accounts
       This provision requires the Secretary of the Treasury, in 
     collaboration with the Secretaries of Labor and Education, to 
     conduct a study and submit a report to Congress regarding the 
     potential establishment of lifelong learning accounts to be 
     used for education or training purposes, and which would be 
     exempt from personal income taxation. The study should 
     include analysis and recommendations regarding whether 
     individuals should be allowed to transfer funds in certain 
     existing retirement or education-related accounts into a 
     lifelong learning account without incurring tax liability or 
     other penalties.

                  Subtitle C--Savings and Investments

     Sec. 321. Regulations relating to private foundation support 
         of innovations in economic development
       This provision requires the Secretary of the Treasury to 
     issue regulations that clearly identify when distributions by 
     private foundations for purposes of economic development will 
     be treated as charitable contributions pursuant to the 
     Internal Revenue Code. This provision also requires the 
     Secretary of the Treasury to issue regulations to clarify the 
     circumstances under which foundations may make investments in 
     start-up ventures without triggering the five percent excise 
     tax applicable to investments

[[Page S13675]]

     which jeopardize the carrying out of any of the Foundation's 
     exempt purposes.
     Sec. 322. Advisory group regarding valuation of intangibles
       This provision requires the Secretary of the Treasury to 
     establish an advisory group to examine issues related to 
     proper valuation of intangible assets, including R&D, 
     business processes and software, brand enhancement, and 
     employee training. The advisory group consists of 
     representatives from the Department of Commerce, the 
     Securities and Exchange Commission, the Commodity Futures 
     Trading Commission, the Board of Governors of the Federal 
     Reserve System, the New York Stock Exchange, the National 
     Association of Securities Dealers Automatic Quotation System 
     and other significant industry sectors. Based on its 
     research, as well as communications with industry and 
     academic experts, the advisory group is required to submit a 
     report to the Secretary of the Treasury within 24 months of 
     enactment, including discussion of best practices for 
     valuation of intangibles and metrics or other solutions for 
     disclosure of intangibles.

                TITLE IV--DEPARTMENT OF DEFENSE MATTERS

               Subtitle A--Defense Research and Education

     Sec. 401. Revitalization of frontier and multidisciplinary 
         research
       U.S. Government investment in frontier and 
     multidisciplinary research is key to the further application 
     and development of innovative technologies. This section 
     establishes as a goal that the Department of Defense allocate 
     at least 3% of its total budget toward science and technology 
     research. This provision also urges the allocation of at 
     least 20 percent of this amount toward basic research in such 
     fields.
     Sec. 402. Enhancement of education
       This section extends the Department of Defense's Science, 
     Mathematics, and Research for Transformation (SMART) 
     Scholarships program through September 30, 2011, and 
     authorizes $41.3 million/year over 5 years for the SMART 
     program to support additional participants pursuing doctoral 
     degrees and master's degrees in relevant fields. This section 
     also authorizes $45 million/year over 5 years to be 
     appropriated to the Department of Defense through 2011 to 
     support the expansion of the National Defense Science and 
     Engineering Graduate Fellowship program to additional 
     participants.
       This section also authorizes the creation of a new 
     Department of Defense competitive traineeship program for 
     students in the areas of mathematics, science, and 
     engineering with specific focus on innovation-oriented 
     studies, multidisciplinary studies and laboratory research. 
     This section authorizes $11.1 million/year over 5 years to 
     sponsor up to 30 doctoral candidates, 30 master's candidates, 
     and 20 undergraduates under this program. Program graduates 
     will be encouraged to work for at least 10 years for the 
     Department of Defense. The Secretary of Defense shall submit 
     an annual report to the House and Senate Armed Services 
     Committees describing the work done by all sponsored students 
     and the benefit of this work to the Department of Defense.

               Subtitle B--Defense Advanced Manufacturing

     Sec. 411. Manufacturing research and development
       This section requires the Under Secretary of Defense for 
     Acquisition, Technology, and Logistics to identify innovative 
     manufacturing processes and advanced technologies that could 
     enhance the efficiency and productivity of the defense 
     manufacturing base. Once identified, the Under Secretary is 
     further required to commission research and development of 
     such innovative processes and technologies, and is encouraged 
     to make use of information technology and new business models 
     in the development of extended production enterprises. The 
     Under Secretary shall consider defense priorities established 
     in the most recent Joint Warfighting Science and Technology 
     Plan when undertaking the aforementioned research and 
     development.
     Sec. 412. Transition of transformational manufacturing 
         processes and technologies to the defense manufacturing 
         base
       This section requires the Under Secretary of Defense for 
     Acquisition, Technology, and Logistics to take certain 
     actions, including the execution of a memorandum of 
     understanding among appropriate elements in the Department of 
     Defense, to accelerate the transition by manufacturers in the 
     defense manufacturing base to transformational manufacturing 
     processes and technologies, including processes and 
     technologies identified or created pursuant to Section 411. 
     The Under Secretary is also required to utilize the existing 
     Manufacturing Technology Program to develop prototypes and 
     test beds for such processes and technologies, and to 
     implement a program for the defense manufacturing base to 
     continuously identify and utilize improvements in such 
     processes and technologies. In order to ensure increases in 
     productivity and efficiency, the Under Secretary will promote 
     research and development under the Manufacturing Technology 
     Program and outreach through the Manufacturing Extension 
     Partnership Program.
     Sec. 413. Manufacturing technology strategies
       The Under Secretary of Defense for Acquisition, Technology, 
     and Logistics is authorized to identify and investigate 
     innovative areas of technology that could be beneficial to 
     the Department of Defense in carrying out its defense 
     manufacturing requirements. Once identified, the Under 
     Secretary may establish a task force with the private sector 
     to map a strategy for the development of such technologies 
     and related manufacturing processes. The roadmapping process 
     shall begin no later than January, 2007.
     Sec. 414. Planning for adoption of strategic innovation
       This section requires the Secretary of Defense to ensure 
     that contracts valued at $50,000,000 or more under a 
     technology or logistics program at the Department of Defense 
     include requirements for planning by the contractor under 
     such contract for the adoption of innovative technologies 
     under that contract. Specifically, contracts must include 
     requirements directed toward identifying and implementing 
     innovative technologies developed in the private sector or 
     academia. Further, such contractors must also report annually 
     on the implementation of such technologies.
     Sec. 415. Report
       This section requires the Under Secretary to submit a 
     report to Congress describing all activities taken pursuant 
     to this Subtitle during Fiscal Year 2007. The report should 
     include an assessment of the effectiveness of each action 
     taken in enhancing the research and development of innovative 
     technologies and processes in the defense manufacturing area, 
     as well as any recommendations for additional actions to be 
     taken consistent with the requirements of this Subtitle.
     Sec. 416. Authorization of appropriations
       This section authorizes $300,000,000 of funding between 
     Fiscal Year 2007 and Fiscal Year 2011 to the Department of 
     Defense for the purposes of carrying out this subtitle.

                  TITLE V--JUDICIARY AND OTHER MATTERS

     Sec. 501. Sense of the Congress on retaining American-
         educated high tech talent in the United States
       This section states that it is the sense of Congress that 
     U.S. immigration laws should be reformed to accommodate the 
     need to retain in the United States those foreign nationals 
     graduating from U.S. universities with master's or higher 
     degrees in the sciences, technology, engineering or 
     mathematics.
     Sec. 502. Study on barriers to innovation
       This section requires the National Academy of Sciences to 
     conduct a study to identify forms of risk that create 
     potential barriers to private sector innovation. The study is 
     intended to support research on the long-term value of 
     innovation to the business community and to identify means to 
     mitigate legal or practical risks presently associated with 
     such innovation activities. This section authorizes 
     $1,000,000 for the purposes of carrying out this study and 
     requires the National Academy to submit a report to Congress 
     on its findings within one year of enactment.
     Sec. 503. Sense of the Congress on patent reform
       It is the sense of the Congress that the United States 
     patent law system should be reformed to enhance the quality 
     of patents, to leverage patent databases as innovation tools, 
     and to create best practices for global collaborative 
     standard-setting. This section further states that the 
     Federal Government should fully fund the Patent and Trademark 
     Office, improve compliance with existing patenting 
     requirements, establish a fair post-grant patent review 
     procedure, and secure reciprocal access to foreign patent 
     databases.
                                  ____


           Summary of the ``National Innovation Act of 2005''

       This legislation responds to the recommendations contained 
     in the National Innovation Initiative Report published by the 
     Council on Competitiveness. In responding to the report, this 
     legislation focuses on three primary areas of importance to 
     maintaining and improving United States' innovation in the 
     21st Century: (1) research investment, (2) increasing science 
     and technology talent, and (3) developing an innovation 
     infrastructure. This bill: Establishes the President's 
     Council on Innovation to develop a comprehensive agenda to 
     promote innovation in the public and private sectors. In 
     consultation with the Office of Management and Budget, this 
     Council would develop and use metrics to assess the impact of 
     existing and proposed laws that affect innovation in the 
     United States. In addition, the Council would help to 
     coordinate the various federal efforts that support 
     innovation, and use metrics to assess the performance of the 
     federal innovation programs located in different 
     administrative agencies, and submit an annual report to the 
     President and to the Congress on how the Federal Government 
     can best support innovation.


                          Research Investment

       Establishes the Innovation Acceleration Grants Program 
     which encourages federal agencies funding research in science 
     and technology to allocate 3% of their Research and 
     Development (R&D) budgets to grants directed toward high-risk 
     frontier research. Although this provision sets 3% of R&D 
     budgets as a strategic goal for allocation to high-risk 
     frontier research projects, it does not mandate that the 
     agencies spend at least 3% of their budgets in this manner. 
     All grants provided to this program will be assessed with 
     metrics and no grants will be renewed unless the agency 
     distributing the

[[Page S13676]]

     grant determines that all metrics have been satisfied.
       Increases the national commitment to basic research by 
     nearly doubling research funding for the National Science 
     Foundation (NSF) by FY 2011.
       Makes permanent the Research and Experimentation (R&E) tax 
     credit with modifications expanding eligibility for 
     incentives to a greater number of firms.


                     Science and Technology Talent

       Expands existing educational programs in the physical 
     sciences and engineering by increasing funding for NSF 
     graduate research fellowship programs as well as Department 
     of Defense science and engineering scholarship programs. 
     These fellowships provide an incentive for more American 
     students to pursue post-graduate degrees in the sciences, 
     technology, engineering, or mathematics.
       Authorizes the Department of Defense to create a 
     competitive traineeship program for undergraduate and 
     graduate students in defense science and engineering that 
     focuses on multidisciplinary learning and innovation-oriented 
     studies.
       Authorizes funding for new and existing Professional 
     Science Master's Degree Programs to increase the number of 
     qualified scientists and engineers entering the workforce.


                       Innovation Infrastructure

       Authorizes the Department of Commerce to promote the 
     development and implementation of state-of-the-art advanced 
     manufacturing systems and to support up to three Pilot Test 
     Beds of Excellence for such systems. The Secretary of 
     Commerce will conduct a competition to select the Pilot Test 
     Beds based on objective criteria and metrics.
       Encourages the development of regional clusters (``hot 
     spots'') of technology innovation throughout the United 
     States.
       Empowers the Department of Defense to identify and 
     accelerate the transition of advanced manufacturing 
     technologies and processes that will improve productivity of 
     the defense manufacturing base.
                                  ____


                  Major Organizations Support the NIA

       ``U.S. leadership in technology has been the cornerstone of 
     America's strategies for driving economic growth and ensuring 
     national security. U.S. leadership is being challenged as 
     never before. The National Innovation Act of 2005 addresses a 
     number of the most critical issues involving technology 
     leadership, especially those related to federal support for 
     basic research. . . . We are especially pleased to support a 
     bipartisan approach to ensuring U.S. technology leadership. 
     The issues at stake--national security and our standard of 
     living in the 21st century--are far too important to become 
     entangled in partisan politics.''--George Scalise, President, 
     Semiconductor Industry Association.
       ``Nothing can do more for the U.S. economy and to help 
     ensure America's global competitiveness than an enhanced 
     focus on innovation and research by the public and private 
     sectors. Senators Ensign and Lieberman are to be commended 
     for bringing bi-partisan leadership to this most critical 
     legislation designed to assure the United States' continued 
     leadership in innovation in the 21st Century.''--F. Duane 
     Ackerman, Chairman and Chief Executive Officer--BellSouth 
     Corporation and Chairman of the Council on Competitiveness.
       ``On behalf of the Council's 180 CEOs, university 
     presidents and labor leaders, I applaud the Senators' efforts 
     and desire to ensure the United States remains the most 
     competitive economic power in the world. We must, as a 
     nation, innovate to compete and to prosper. This legislation 
     is a critical step forward towards that goal.''--Deborah L. 
     Wince-Smith, President, Council on Competitiveness.
       ``America's constant advance on `endless frontier' of 
     scientific discovery and engineering innovation has paid 
     enormous dividends for generations. But there is no room for 
     complacency in a world where ideas spread around the globe at 
     the speed of light. The National Innovation Act of 2005 
     ensures that America will continue to focus on the future by 
     supporting essential investments in high risk research and 
     education--investments that will pay dividends far into the 
     future.''--Henry Kelly, President of the Federation of 
     American Scientists.
       ``In response to new competitive threats in the 1980s, 
     Congress enacted important legislation to help American 
     companies successfully meet that challenge. Twenty years 
     later, as America once again faces competitiveness 
     challenges, the National Innovation Act of 2005 proposes 
     critically important policies and programs to foster 
     innovation and help American companies and workers prosper in 
     the new global economy of the 21st century.''--Dr. Robert 
     Atkinson, Vice President, Progressive Policy Institute, 
     Washington, DC.
       ``IBM applauds the introduction of the National Innovation 
     Act of 2005 . . . Innovation underpins American economic 
     growth and national security. In today's era of global 
     opportunity and change, the rewards flow to those who 
     innovate and turn disruptive shifts to their advantage. 
     America has a long, proud history of recognizing when change 
     is required and rising to the challenge. We are at such an 
     inflection point today. The National Innovation Act of 2005 
     will create synergies among America's academic, business and 
     government communities to ensure the future growth of the 
     United States. I urge all Senators to support this 
     legislation.''--Nicholas M. Donofrio, Executive Vice 
     President, IBM Corporation.
       ``The new bipartisan Innovation Bill represents an 
     important, multifaceted strategic and systemic approach to 
     one of the most important problem sets facing the long term 
     American future.''--Martin Apple, President, Council of 
     Scientific Society Presidents.
       ``EIA is thrilled by today's introduction of the National 
     Innovation Act of 2005 (NIA), which includes so many measures 
     that can help the U.S. remain an economic leader in the 
     global high-tech economy. It is an ambitious piece of 
     legislation that spans the policy spectrum, but with the 
     commitment and support of policymakers from both sides of the 
     aisle, we hope to see these important provisions quickly 
     begin to take effect and fuel the U.S. innovation engine.''--
     Dave McCurdy, CEO, Electronic Industries Association.
       ``We are writing to express our support for the National 
     Innovation Act of 2005. Athena Alliance is research institute 
     focused on understanding the emerging Information, Innovation 
     and Intangibles (I-Cubed) Economy . . . The United States 
     faces a critical challenge in coping with this new I-Cubed 
     Economy. Athena Alliance believes that the National 
     Innovation Act of 2005 is a step forward in addressing this 
     challenge.''--Richard Cohon, Chairman; Kenan Jarboe, 
     President; Athena Alliance.
       ``The U.S. government is an important partner in fostering 
     innovation, but together we must do more. The country is 
     facing great competitive challenges and now is the time to 
     demonstrate real leadership. The National Innovation Act lays 
     out a solid plan and I urge the Congress to support it.''--
     Victoria Hadfield, President of SEMI North America.
       ``I truly believe that our nation's future economic and 
     technological leadership are at risk if we do not act soon to 
     strengthen American competitiveness. Senators Ensign and 
     Lieberman are leading the way by proposing comprehensive 
     legislation that will substantially increase our commitment 
     to basic research, take decisive steps to grow the S&T talent 
     pool, and provide meaningful incentives to encourage 
     innovation.''--Dr. Ann Nalley, President of the American 
     Chemical Society.
       ``IEEE-USA applauds Senators John Ensign and Joseph 
     Lieberman and their staff for their tireless efforts in 
     crafting legislation designed to enhance and preserve U.S. 
     competitiveness and innovation. This bill represents a huge 
     step forward in promoting policies that will sustain U.S. 
     technological leadership and encourage the development of the 
     skilled, creative and competitive workforce critical for U.S 
     prosperity . . . We urge Congress to deal with this 
     legislation expeditiously.''--Gerard A. Alphonse, President, 
     IEEE-USA.
       ``ASTRA, The Alliance for Science & Technology Research in 
     America, strongly supports the National Innovation Initiative 
     and the National Innovation Act of 2005. ASTRA's Board of 
     Directors has identified enactment of the National Innovation 
     Act of 2005 as its top legislative priority for 2006. In many 
     ways, The Act represents the culmination of nearly five years 
     of concerted effort by ASTRA and its members to raise this 
     issue to a national level of discussion and we are very 
     gratified by this initiative.''--Robert S. Boege, Exectuive 
     Director, ASTRA.
       ``There is no more important public policy priority than 
     creating an environment in which innovation will flourish and 
     fuel continued U.S. economic growth and global leadership. 
     The National Innovation Act embodies this goal and rightly 
     calls for our nation to focus our attention on the critical 
     areas of research and development, economic incentives and 
     investments in education in order to maintain our edge. 
     TechNet applauds Senators Ensign and Lieberman on this 
     important measure that will help America remain the global 
     technology and scientific leader.''--Lezlee Westine, 
     President and CEO of TechNet.
       ``The National Innovation Act of 2005 . . . is a 
     significant bi-partisan response to the challenges the U.S. 
     faces in the hypercompetitive, networked global economy . . . 
     The legislation is properly aimed at reversing adverse trends 
     in research and human capital by augmenting funding for 
     multidisciplinary research, accelerating innovation in 
     manufacturing and the service sectors and investing more 
     resources in the next generation scientists, engineers, 
     workers and entrepreneurs.''--Egils Milbergs, President, 
     Center for Accelerating Innovation.
                                  ____



                                                      TechNet,

                                                December 14, 2005.
     Hon. John Ensign,
     U.S. Senate,
     Washington, DC.
     Hon. Joseph Lieberman,
     U.S. Senate,
     Washington, DC.
       Dear Senators Ensign and Lieberman: As TechNet members and 
     chief executives of the Nation's leading technology 
     companies, we are writing to express our strong support for 
     the National Innovation Act (NIA) of 2005. We commend your 
     leadership in developing the NIA and look forward to working 
     with you to support enactment of this important legislation.
       Our Nation has reached a critical juncture unprecedented in 
     our history. While our Nation continues to be the world's 
     leader in many technological and scientific discoveries and 
     breakthroughs, other nations are

[[Page S13677]]

     working to create their own innovation infrastructure. These 
     efforts range from tax incentives to attract new research and 
     development to increased investments in math and science 
     education. In short, with so many countries recognizing R&D's 
     economic development potential, the U.S. can no longer take 
     its current leading position for granted, nor accept the 
     status quo as sufficient to stay competitive.
       Not surprisingly, these were the same observations and 
     conclusions reached by those leaders in business and academia 
     who came together to produce Innovate America, the National 
     Innovation Initiative Report, which was released this year by 
     the Council on Competitiveness. This report produced a series 
     of recommendations that collectively represent landmarks on a 
     roadmap leading toward a nation better equipped and educated 
     to both innovate and compete in a global economy.
       We are pleased to see a substantial number of these 
     recommendations embodied in the NIA. Your legislation clearly 
     recognizes that changes are needed in a wide range of areas: 
     reforms in tax policy; federal investments in elementary and 
     secondary education; scholarship and grant availability for 
     university graduate and undergraduate students; federal 
     research priorities; intellectual property protection; and 
     critical areas in our innovation infrastructure, including 
     health care and our armed forces.
       The depth and diversity of the issues covered in the NIA 
     demonstrate the complexity and the enormity of the 
     fundamental challenge that confronts us: the economic 
     security and competitiveness of our Nation.
       We stand ready to work with you to move this important 
     legislation forward and thank you for your shared commitment 
     to the Nation's future innovative capacity and capability.
           Sincerely,
         Jim Barksdale, Partner, Barksdale Management Corporation, 
           Co-Founder, TechNet; John Chambers, President & CEO, 
           Cisco Systems, Inc., Co-Founder, TechNet; John Doerr, 
           Partner, Kleiner Perkins Caufield & Byers, Co-Founder, 
           TechNet; James Breyer, Managing Partner, Accel 
           Partners; Ronald Conway, Founder & General Partner, 
           Angel Investors, LP; Carol Bartz, Chairman, President & 
           CEO, Autodesk, Inc.; Jesse Devitte, Managing Director, 
           Borealis Ventures; Henry Samueli, Chairman & CTO, 
           Broadcom Corporation; Gary Lauer, Chairman & CEO, 
           eHealthInsurance; Craig R. Barrett, Chairman, Intel 
           Corporation; Brian Keane, President & CEO, Keane, Inc.; 
           Ralph Folz, CEO, Molecular, Inc.; Safra Catz, President 
           & CFO, Oracle Corporation; Phillip Dunkelberger, 
           President & CEO, PGP Corporation; Norman S. Wolfe, 
           President & CEO, Quantum Leaders, Inc.; Lezlee Westine, 
           President & CEO, TechNet; Nancy Heinen, Sr. Vice 
           President & General Counsel, Apple; Tod Loofbourrow, 
           President & CEO, Authoria; Dwight W, Decker, Chairman & 
           CEO, Conexant Systems, Inc.; Donald B. Means, Founder & 
           Principal, Digital Village Associates; Meg Whitman, 
           President & CEO, eBay Inc.; Christopher Greene, 
           President & CEO, Greene Engineers; Brad Smith, Sr. Vice 
           President & General Counsel, Microsoft Corporation; 
           Raouf Y. Halim, CEO, Mindspeed Technologies, Inc.; 
           Harry W. Kellogg, Jr.,; Vice Chairman, Silicon Valley 
           Bank; Chuck Moran, President & CEO, SkillSoft; Robert 
           Farnsworth, CEO, Sonnet Technologies, Inc.; John S. 
           Chen, Chairman, President & CEO, Sybase, Inc.; John 
           Thompson, Chairman & CEO, Symantec Corporation; Aart de 
           Geus, Chairman and CEO, Synopsys, Inc.; Willem 
           Roelandts, CEO, Xilinx; Robin L. Curle, President, CEO 
           & Chairman, Zebra Imaging, Inc.
                                  ____


            [From the Association of American Universities]

            Statement on the National Innovation Act of 2005

       The Association of American Universities applauds Senators 
     Ensign and Lieberman for their introduction of the National 
     Innovation Act of 2005. This legislation responds directly to 
     the outstanding set of recommendations made by the Council on 
     Competitiveness for much needed improvements in our Nation's 
     ability to innovate and compete globally.
       The Council's report, like subsequent reports by the 
     National Academies and a host of business and academic 
     organizations, makes a powerful case that the Nation's 
     ability to compete effectively in the 21st century is under 
     serious threat. That threat is posed largely by continuing 
     underinvestment in fundamental research and our growing 
     weakness in producing scientists, engineers, and others with 
     the technological skills needed for the workforce of the 
     future.
       The proposals contained in the National Innovation Act 
     represent a critical step toward strengthening the Nation's 
     innovation infrastructure for the 21st century. Among other 
     things, the measure would create a Presidential Council on 
     Innovation, authorize doubling research funding at the 
     National Science Foundation by FY 2011, expand graduate 
     fellowships and traineeships, and encourage federal research 
     agencies to devote three percent of their research and 
     development budgets to ``high-risk frontier research.''
       The legislation not only addresses the Council's 
     recommendations but also reflects what has become a consensus 
     among the nation's business and academic communities 
     concerning actions we must take to ensure our future global 
     competitiveness and our national security. It is the hope of 
     AAU and the 60 leading U.S. research universities that 
     comprise its membership that Congress will begin acting on 
     these proposals at the earliest possible date.
                                  ____



                                  Council of Graduate Schools,

                                Washington, DC, December 14, 2005.
     Hon. Joseph Lieberman,
     Hart SOB,
     Washington, DC.
       Dear Senator Lieberman: I am writing to commend you for 
     supporting U.S. competitiveness, innovation, and research and 
     development through the introduction of the National 
     Innovation Act. The Council of Graduate Schools (CGS) and its 
     450 plus member institutions are very grateful for your 
     leadership in addressing the important issue of strengthening 
     American competitiveness and for your recognition of the role 
     of graduate education in this process.
       We are especially supportive of the National Innovation 
     Act's provisions related to science and technology talent and 
     the strong emphasis on graduate education contained in 
     Sections 201, 202, 203 and 402 of the bill. We are 
     specifically supportive of the following provisions:
       Increased funding for the NSF Graduate Research Fellowship 
     and Integrative Graduate Education and Research Traineeship 
     program;
       Authorization of funds for new and existing Professional 
     Science Master's Degree programs to increase the number of 
     qualified scientists and engineers entering the workforce 
     and;
       Authorization of a competitive traineeship program for 
     undergraduate and graduate students in defense science and 
     engineering focusing on multidisciplinary learning and 
     innovation-oriented studies, and extension of the SMART 
     program supporting additional participants pursuing doctoral 
     and master's degrees in key fields.
       Supporting graduate education is critical to achieving the 
     highly skilled workforce needed for the U.S. to compete 
     effectively in the 21st century global economy. Thank you for 
     your leadership in this important policy matter. The Council 
     of Graduate Schools looks forward to working with you to 
     implement this important legislation.
           Sincerely,
                                                 Debra W. Stewart.
                                 ______