    [House Report 105-620]
    [From the U.S. Government Publishing Office]

    105th Congress                                            Rept. 105-620
                            HOUSE OF REPRESENTATIVES

     2d Session                                                      Part I
    _______________________________________________________________________

               TECHNOLOGY TRANSFER COMMERCIALIZATION ACT OF 1998

    _______________________________________________________________________

                     July 14, 1998.--Ordered to be printed

                                    _______

        Mr. Sensenbrenner, from the Committee on Science, submitted the
                                   following

                                  R E P O R T

                            [To accompany H.R. 2544]

          [Including cost estimate of the Congressional Budget Office]

        The Committee on Science, to whom was referred the bill
    (H.R. 2544) to improve the ability of federal agencies to
    license federally owned inventions, having considered the same,
    reports favorably thereon with an amendment and recommends that
    the bill as amended do pass.

                                C O N T E N T S

                                                                       Page
       I. Amendment.......................................................2
      II. Purpose of the Bill.............................................4
     III. Background and Need for the Legislation.........................4
      IV. Summary of Hearings.............................................6
       V. Committee Actions...............................................9
      VI. Summary of Major Provisions of the Bill........................10
     VII. Section-By-Section Analysis (By Title and Section).............10
    VIII. Committee Views................................................12
      IX. Committee Cost Estimate........................................16
       X. Congressional Budget Office Cost Estimate......................16
      XI. Compliance With Public Law 104-4...............................17
     XII. Committee Oversight Findings and Recommendations...............17
    XIII. Oversight Findings and Recommendations by the Committee on
          Government Reform and Oversight................................17
     XIV. Constitutional Authority Statement.............................18
      XV. Federal Advisory Committee Statement...........................18
     XVI. Congressional Accountability Act...............................18
    XVII. Changes in Existing Law Made by the Bill, as Reported..........18
    XVIII.Committee Recommendations......................................24

     XIX. Exchange of Committee Correspondence...........................24
      XX. Proceedings of the Subcommittee Markup.........................27
     XXI. Proceedings of the Full Committee Markup.......................53

                                  I. Amendment

        The amendment is as follows:
        Strike out all after the enacting clause and insert in lieu
    thereof the following:

    SECTION 1. SHORT TITLE.

        This Act may be cited as the ``Technology Transfer
    Commercialization Act of 1998''.

    SEC. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

        Section 12(b)(1) of the Stevenson-Wydler Technology Innovation Act
    of 1980 (15 U.S.C. 3710a(b)(1)) is amended by inserting ``or, subject
    to section 209 of title 35, United States Code, may grant a license to
    an invention which is federally owned, made before the granting of the
    license, and directly related to the scope of the work under the
    agreement,'' after ``under the agreement,''.

    SEC. 3. LICENSING FEDERALLY OWNED INVENTIONS.

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

    ``Sec. 209. Licensing federally owned inventions

        ``(a) Authority.--A Federal agency may grant an exclusive or
    partially exclusive license on a federally owned invention only if--
                ``(1) granting the license is a reasonable and necessary
            incentive to--
                        ``(A) call forth the investment capital and
                    expenditures needed to bring the invention to practical
                    application; or
                        ``(B) otherwise promote the invention's utilization
                    by the public;
                ``(2) the Federal agency finds that the public will be
            served by the granting of the license, as indicated by the
            applicant's intentions, plans, and ability to bring the
            invention to practical application or otherwise promote the
            invention's utilization by the public, and that the proposed
            scope of exclusivity is not greater than reasonably necessary
            to provide the incentive for bringing the invention to
            practical utilization, as proposed by the applicant, or
            otherwise to promote the invention's utilization by the public;
                ``(3) the applicant makes a commitment to achieve practical
            utilization of the invention within a reasonable time;
                ``(4) granting the license will not tend to substantially
            lessen competition or create or maintain a violation of the
            Federal antitrust laws; and
                ``(5) in the case of an invention covered by a foreign
            patent application or patent, the interests of the Federal
            Government or United States industry in foreign commerce will
            be enhanced.
        ``(b) Manufacture in United States.--A Federal agency shall
    normally grant a license to use or sell any federally owned invention
    in the United States only to a licensee who agrees that any products
    embodying the invention or produced through the use of the invention
    will be manufactured substantially in the United States.
        ``(c) Small Business.--First preference for the granting of any
    exclusive or partially exclusive licenses under this section shall be
    given to small business firms having equal or greater likelihood as
    other applicants to bring the invention to practical application within
    a reasonable time.
        ``(d) Terms and Conditions.--Licenses granted under this section
    shall contain such terms and conditions as the granting agency
    considers appropriate. Such terms and conditions shall include
    provisions--
                ``(1) retaining a nontransferrable, irrevocable, paid-up
            license for the Federal agency to practice the invention or
            have the invention practiced throughout the world by or on
            behalf of the Government of the United States;
                ``(2) requiring periodic reporting on utilization of the
            invention, and utilization efforts, by the licensee, but only
            to the extent necessary to enable the Federal agency to
            determine whether the terms of the license are being complied
            with; and
                ``(3) empowering the Federal agency to terminate the
            license in whole or in part if the agency determines that--
                        ``(A) the licensee is not executing its commitment
                    to achieve practical utilization of the invention,
                    including commitments contained in any plan submitted
                    in support of its request for a license, and the
                    licensee cannot otherwise demonstrate to the
                    satisfaction of the Federal agency that it has taken,
                    or can be expected to take within a reasonable time,
                    effective steps to achieve practical utilization of the
                    invention;
                        ``(B) the licensee is in breach of an agreement
                    described in subsection (b);
                        ``(C) termination is necessary to meet requirements
                    for public use specified by Federal regulations issued
                    after the date of the license, and such requirements
                    are not reasonably satisfied by the licensee; or
                        ``(D) the licensee has been found by a competent
                    authority to have violated the Federal antitrust laws
                    in connection with its performance under the license
                    agreement.
        ``(e) Public Notice.--No exclusive or partially exclusive license
    may be granted under this section unless public notice of the intention
    to grant an exclusive or partially exclusive license on a federally
    owned invention has been provided in an appropriate manner at least 15
    days before the license is granted, and the Federal agency has
    considered all comments received in response to that public notice.
    This subsection shall not apply to the licensing of inventions made
    under a cooperative research and development agreement entered into
    under section 12 of the Stevenson-Wydler Technology Innovation Act of
    1980 (15 U.S.C. 3710a).
        ``(f) Basic Business Plan.--A Federal agency may grant a license on
    a federally owned invention only if the person requesting the license
    has supplied to the agency a basic business plan with development
    milestones, commercialization milestones, or both.
        ``(g) Nondisclosure of Certain Information.--Any basic business
    plan, and revisions thereto, submitted by an applicant for a license,
    and any report on the utilization or utilization efforts of a licensed
    invention submitted by a licensee, shall be treated by the Federal
    agency as commercial and financial information obtained from a person
    and not subject to disclosure under section 552 of title 5, United
    States Code.''.
        (b) Conforming Amendment.--The item relating to section 209 in the
    table of sections for chapter 18 of title 35, United States Code, is
    amended to read as follows:

    ``209. Licensing federally owned inventions.''.

    SEC. 4. TECHNICAL AMENDMENTS TO BAYH-DOLE ACT.

        Chapter 18 of title 35, United States Code (popularly known as the
    ``Bayh-Dole Act''), is amended--
                (1) by amending section 202(e) to read as follows:
        ``(e) In any case when a Federal employee is a coinventor of any
    invention made under a funding agreement with a nonprofit organization
    or small business firm, the Federal agency employing such coinventor
    may, for the purpose of consolidating rights in the invention--
                ``(1) license or assign whatever rights it may acquire in
            the subject invention from its employee to the nonprofit
            organization or small business firm; or
                ``(2) acquire any rights in the subject invention, but only
            to the extent the party from whom the rights are acquired
            voluntarily enters into the transaction.''; and
                (2) in section 207(a)--
                        (A) by striking ``patent applications, patents, or
                    other forms of protection obtained'' and inserting
                    ``inventions'' in paragraph (2); and
                        (B) by inserting ``, including acquiring rights for
                    the Federal Government in any invention, but only to
                    the extent the party from whom the rights are acquired
                    voluntarily enters into the transaction, to facilitate
                    the licensing of a federally owned invention'' after
                    ``or through contract'' in paragraph (3).

    SEC. 5. TECHNICAL AMENDMENTS TO THE STEVENSON-WYDLER TECHNOLOGY
                        INNOVATION ACT OF 1980.

        Section 14(a)(1) of the Stevenson-Wydler Technology Innovation Act
    of 1980 (15 U.S.C. 3710c(a)(1)) is amended--
                (1) in subparagraph (A)(i), by inserting ``, if the
            inventor's or coinventor's rights are assigned to the United
            States'' after ``inventor or coinventors''; and
                (2) in subparagraph (B), by striking ``succeeding fiscal
            year'' and inserting ``2 succeeding fiscal years''.

    SEC. 6. REVIEW OF COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
                        PROCEDURES.

        (a) Review.--The Director of the Office of Science and Technology
    Policy, in consultation with relevant Federal agencies, national
    laboratories, and any other person the Director considers appropriate,
    shall review the general policies and procedures used by Federal
    agencies to gather and consider the views of other agencies on--
                (1) joint work statements under section 12(c)(5)(C) or (D)
            of the Stevenson-Wydler Technology Innovation Act of 1980 (15
            U.S.C. 3710a(c)(5)(C) or (D)); or
                (2) in the case of laboratories described in section
            12(d)(2)(A) of the Stevenson-Wydler Technology Innovation Act
            of 1980 (15 U.S.C. 3710a(d)(2)(A)), cooperative research and
            development agreements under such section 12,
    with respect to major proposed cooperative research and development
    agreements that involve critical national security technology or may
    have a significant impact on domestic or international competitiveness.
        (b) Procedures.--Within one year after the date of the enactment of
    this Act, the Director of the Office of Science and Technology Policy,
    in consultation with relevant Federal agencies and national
    laboratories, shall--
                (1) determine the adequacy of existing procedures and
            methods for interagency coordination and awareness; and
                (2) establish and distribute to appropriate Federal
            agencies--
                        (A) specific criteria to indicate the necessity for
                    gathering and considering the views of other agencies
                    on joint work statements or cooperative research and
                    development agreements as described in subsection (a);
                    and
                        (B) additional procedures, if any, for carrying out
                    such gathering and considering of agency views.
    Procedures established under this subsection shall be designed to the
    extent possible to use or modify existing procedures, to minimize
    burdens on Federal agencies, to encourage industrial partnerships with
    national laboratories, and to minimize delay in the approval or
    disapproval of joint work statements and cooperative research and
    development agreements.

                            II. Purpose of the Bill

        The purpose of H.R. 2544, as reported, is to promote the
    transfer and commercialization of the technology created in our
    Nation's system of over 700 federal laboratories, thereby
    increasing scientific collaboration between federal
    laboratories and private industry. Specifically, the reported
    bill improves and streamlines the ability of federal agencies
    to license federally owned inventions.

                  III. Background and Need for the Legislation

        For nearly 2 decades, the Committee has encouraged the
    transfer to United States private industry of unclassified
    technology created in our federal laboratories. Our federal
    laboratories have long been considered one of our greatest
    scientific research and development resources, employing one of
    every six scientists in the country and encompassing one-fifth
    of the country's laboratory and equipment capabilities.
    Effectively capturing this wealth of ideas and technology from
    our federal laboratories, through the transfer to private
    industry for commercialization, has helped to bolster our
    Nation's ability to compete in the global marketplace.
        By permitting effective collaboration between our federal
    laboratories and private industry, new technologies can be
    rapidly commercialized. Federal technology transfer stimulates
    the American economy, enhances the competitive position of
    United States industry internationally, and promotes the
    development and use of new technologies developed under
    taxpayer funded research so those innovations are incorporated
    rapidly and effectively into practice to the benefit of the
    American public.
        To help further these goals, the Committee first reported
    the Stevenson-Wydler Technology Innovation Act of 1980 (Public
    Law 96-480). The Committee expanded on that landmark
    legislation with the passage of the Federal Technology Transfer
    Act of 1986 (Public Law 99-502), the National Competitiveness
    Technology Transfer Act of 1989 (Public Law 101-189), the
    American Technology Preeminence Act of 1991 (Public Law 102-
    245), and the National Technology Transfer and Advancement Act
    of 1995 (Public Law 104-113), among others.
        In 1980, the Committee also reported the University and
    Small Business Patent Procedures Act, now commonly referred to
    as the Bayh-Dole Act (Public Law 96-517). The Bayh-Dole Act
    permits universities, not-for-profit organizations, and small
    businesses to obtain title to scientific inventions developed
    with Federal Government support. The Bayh-Dole Act also allows
    federal agencies to license government-owned patented
    scientific inventions nonexclusively, partially exclusively, or
    exclusively, depending upon which avenue seems to be the most
    effective means for achieving commercialization. Additionally,
    the Committee reported out amendments to the Bayh-Dole Act in
    the Trademark Clarification Act of 1984 (Public Law 98-620),
    which permitted decisions on the awarding of licenses for
    patents to be made at the laboratory level in a government-
    owned, contractor-operated laboratory (GOCO).
        Critical pressures prompted the passage of the Bayh-Dole
    Act. Prior to its enactment, many of the discoveries that
    resulted from federally-funded scientific research were not
    commercialized for the benefit of the American public. Since
    the Federal Government lacked the resources to market new
    innovations, and private industry was reluctant to make high-
    risk investments without the protection of patent rights, many
    valuable new innovations were left to sit unused on the shelf
    at federal laboratories.
        Widely viewed as an effective framework for federal
    technology transfer, the Bayh-Dole Act has resulted in
    successful patent licensing. In a report submitted to the
    Committee, the Association of University Technology Managers
    (AUTM) conducted a 1996 study on the effect of the Bayh-Dole
    Act. AUTM concluded that the law garnered tremendous economic
    benefits not just for the universities and private industry
    directly involved in each partnership, but more importantly,
    for the United States economy as a whole. The AUTM report
    documented that the effect of the Bayh-Dole Act represented a
    very real gain to federal agencies and the Nation since it not
    only encourages the commercialization of government-owned
    patents that would otherwise gather dust on the shelf, but it
    also brings in revenues to the Federal Government through
    licensing fees.
        Accordingly, the process for the licensing of government-
    owned patents should continue to be refined by streamlining the
    procedures and by removing the uncertainty associated with the
    licensing process. Both past and prospective private industry
    partners, however, have voiced their concerns regarding the
    licensing process. They indicate that the strategic advantages
    of acquiring intellectual property rights through a Cooperative
    Research and Development Agreement (CRADA) and/or the licensing
    of government-owned technology are unfortunately offset by the
    delays and uncertainty often associated with the lengthy
    federal technology transfer process which is often out of sync
    with private sector timing. In addition to the added
    uncertainty as to whether the license will be granted, these
    procedural barriers increase transaction costs and delay
    commercialization.
        The present regulations also make it difficult for a
    government-owned and government-operated laboratory (GOGO) to
    bring existing scientific inventions into a CRADA even when
    inclusion would create a more complete technology package. A
    GOGO does not have the flexibility that small businesses and
    non-profits have in managing their inventions under the Bayh-
    Dole Act. Also, a GOGO, unlike a GOCO, currently faces
    statutory notification provisions when granting exclusive
    licenses, and more importantly, it cannot include existing
    inventions in a CRADA under the Federal Technology Transfer Act
    of 1986.
        By reducing the delay and uncertainty imposed by existing
    procedural barriers and thus lowering the transactional costs
    associated with licensing technology transfer from federal
    laboratories, federal agencies could greatly increase
    participation by the private sector in their technology
    transfer programs. This approach would expedite the
    commercialization of the government-owned invention and reduce
    the cost to the American taxpayer for the production of new
    technology-based products.

                            IV. Summary of Hearings

    September 25, 1997: ``Promoting Technology Transfer by Facilitating
            Licenses to Federally Owned Inventions''

        On September 25, 1997, the Subcommittee on Technology held
    a hearing on ``Promoting Technology Transfer by Facilitating
    Licenses to Federally Owned Inventions.'' The hearing was held
    to discuss the effectiveness of our federal technology transfer
    laws and methods in which they may be improved, and to review
    H.R. 2544, the Technology Transfer Commercialization Act of
    1997, which seeks to promote technology transfer by
    facilitating licenses to federally-owned inventions. Witnesses
    included: Mr. Joe Allen, Vice President, Market and Technology
    Assessment, National Technology Transfer Center, Wheeling, WV;
    Mr. C. Dan Brand, Chair, Federal Laboratory Consortium,
    Jefferson, AR; Mr. Dan Passeri, Vice President, Business
    Development and Intellectual Property, Gene Logic, Inc.,
    Columbia, MD; and Mr. John G. Mannix, Associate General
    Counsel, National Aeronautics and Space Administration, NASA
    Headquarters, Washington, DC.
        Mr. Joe Allen, testifying as Vice President, Market and
    Technology Assessment, National Technology Transfer Center,
    stated that linking federal laboratories and universities with
    American industry holds great promise for our future economic
    prosperity. Mr. Allen asserted that the passage of the Bayh-
    Dole Act in 1980, initially considered a bold and radical idea,
    is now a model that our economic competitors are emulating.
    This legislation holds the same promise. However, Mr. Allen
    believes that in order to license government-owned inventions,
    the Congress must ease the current complex system which a
    company must go through. For example, a company must publish in
    the Federal Register its intention to pursue a federally-owned
    license. Companies, however, are reluctant to do this as it
    effectively gives away their marketing strategy. In conclusion,
    Mr. Allen recommended taking a well thought out incremental
    approach, such as H.R. 2544, that simplifies current procedures
    while retaining important safeguards.
        Mr. Daniel R. Passeri, testifying as Vice President, Gene
    Logic, Inc., spoke of the importance for the Federal Government
    to streamline the procedures and remove the uncertainty
    associated with the licensing determination process. In doing
    so, the Federal Government will foster an attractive
    environment for corporate investment and partnering efforts.
    Mr. Passeri believes that under the current system there is a
    tension between the needs of industry to rapidly respond to
    market demands and opportunities, and the procedural
    requirements of federal agencies in regards to the exclusive
    licensing of high risk, early stage technology. He stated that
    these procedural barriers create increased transaction costs,
    delays in obtaining the license, as well as the uncertainty of
    actually being granted the license. The barriers, however, do
    not exist in university technology transfer. In conclusion, Mr.
    Passeri welcomed H.R. 2544's proposed improvements to the
    current law and indicated that in their current form, they will
    address the frustrations of industry.
        Mr. C. Dan Brand, testifying as Chair, Federal Laboratory
    Consortium, spoke of the Federal Laboratory Consortium's (FLC)
    importance as the nationwide network of federal laboratories
    who provide a forum to develop strategies and opportunities for
    linking government technology to the marketplace. Mr. Brand
    stated that in advance of this hearing, the FLC solicited and
    received comments from a number of their member departments and
    agencies on removing legal obstacles to effectively license
    federally-owned inventions. He cautioned that these are not an
    ``official'' department or agency position, but rather an
    initial assessment. Mr. Brand stated the FLC's belief, as well
    as those comments received from departments and agencies, is
    that the amendments to the Bayh-Dole Act will serve to speed
    transfer and commercialization of technologies to industry,
    while maintaining a fair and open competitive environment. Mr.
    Brand further cautioned that while the initial input from
    member laboratories was largely positive, the Subcommittee
    should also consider the views of the FLC Legal Issues
    Committee and the National Institutes of Health.
        Mr. John G. Mannix, testifying as Associate General
    Counsel, Intellectual Property, National Aeronautics and Space
    Administration, began by stating that neither NASA nor the
    Administration had an opportunity to completely review the
    proposed legislation so neither has had an opportunity to
    formulate a detailed position. However, Mr. Mannix asserted
    that having learned many lessons over the years in this regard,
    he would hope NASA's position would be considered before any
    changes in the law were made. Mr. Mannix highlighted the two
    major improvements to the licensing process that he has seen
    during his career. First, he cited the increased personal
    involvement of technical experts, and individuals with
    marketing, negotiation, and business experience in the
    licensing process. Second, he emphasized the importance of the
    statutory authority given to NASA negotiators to require
    written commercialization plans and yearly status reports
    describing progress toward commercialization. Additionally, Mr.
    Mannix emphasized the importance of providing some form of
    notice of the availability of federally owned licenses. Without
    such a notice, Mr. Mannix maintained, we will always be subject
    to claims of favoritism.

    March 17, 1998: ``Facilitating Licenses to Federally-Owned Inventions:
            A Legislative Hearing on H.R. 2544, the Technology Transfer
            Commercialization Act''

        On March 17, 1998, the Subcommittee on Technology held a
    hearing on ``Facilitating Licenses to Federally-Owned
    Inventions: A Legislative Hearing on H.R. 2544, the Technology
    Transfer Commercialization Act.'' The hearing was held to
    review H.R. 2544, the Technology Transfer Commercialization Act
    of 1997, which seeks to promote technology transfer by
    facilitating licenses to federally-owned inventions. Witnesses
    included: The Honorable Ray Kammer, Director, National
    Institute of Standards and Technology, Gaithersburg, MD; Mr.
    Randolph J. Guschl, Director of Technology Acquisitions,
    Central Research and Development, DuPont Chemical Company,
    Wilmington, DE; Ms. Elizabeth Kraftician, Chief Executive
    Officer, Touchstone Research Laboratory, Tridelphia, WV.
        The Honorable Ray Kammer, testifying as Director, National
    Institute of Standards and Technology explained the newly
    formed Interagency Committee on Technology Transfer and the
    consensus of this Committee on H.R. 2544. Specifically, Mr.
    Kammer emphasized the need to pay closer attention to the
    output side of R&D spending. While a greater pecuniary
    commitment to R&D spending is laudable, the end result is
    equally important. Further, enabling end results to make their
    way to the marketplace is equally important, as they can have
    important societal benefits. He also spoke of the Interagency
    Committee's suggestions regarding certain provisions of the
    legislation. For example, the agencies suggest the licensees be
    subject to the same current notification requirements and the
    need to retain current requirements for licensees to submit
    development or marketing plans. Mr. Kammer emphasized the
    importance of utilizing those plans as an objective basis for
    deciding whether the prospective licensee is likely to quickly
    bring the innovation to market. Additionally, bundling
    innovations should be addressed in the legislation and Mr.
    Kammer spoke of the improved ability to streamline and allow
    licensees to derive maximum commercial benefit from inventions
    by ``bundling'' similar innovations together. In conclusion he
    indicated that industry and the government are still learning
    how to better work together in commercializing the American
    people's investment in R&D.
        Mr. Randolph J. Guschl, testifying as Director, Technology
    Acquisitions, Central Research and Development, DuPont,
    Wilmington, DE, expressed support for the legislation and
    highlighted the fact that H.R. 2544 puts the discoveries of
    government-owned, government-operated (GOGO) laboratories on
    terms equal to those of government-owned, contractor operated
    (GOCO) laboratories. However, Mr. Guschl indicated he had a
    couple of ideas regarding the legislation. First, revise the
    wording regarding U.S. manufacture. Better language would
    require the earliest possible deployment in the United States,
    but not require it to be substantially manufactured in the
    United States. This would allow U.S. businesses to compete
    globally, thereby strengthening the U.S. components of
    international companies. Second, he supports the bill's
    recognition of exclusivity. This provision has been used in
    GOCO labs and should also be used in GOGO labs. Third, he
    support the bill's shift from 90+60 day notification process to
    a 30 day notification process. Fourth, retain requiring
    submission of a business and marketing plan. This allows agency
    to determine commitment of prospective licensees. Lastly,
    consider empowering the technology transfer directors to make
    quick and final decisions for their labs, but also allow there
    to be a quick appeals process. In conclusion, Mr. Guschl
    suggested support for the legislation and commended its
    improvement of the technology transfer process.
        Ms. Elizabeth Kraftician, Chief Executive Officer,
    Touchstone Research Laboratory, offered her strong support for
    H.R. 2544. Ms. Kraftician believes this legislation will have a
    strong impact in moving federal technologies to the
    marketplace. Additionally, Ms. Kraftician expressed support for
    this legislation as a way to benefit small businesses in this
    technology transfer process. Small businesses have
    traditionally been locked out of the technology transfer arena
    by the slow, cumbersome, bureaucratic and oftentimes anti-small
    business process by which Federal Government has traditionally
    transferred technology to the marketplace. Ms. Kraftician
    applauded especially H.R. 2544's leveling the notification
    playing field by allowing advertisement in a wider variety of
    venues which gives the federal laboratory greater flexibility
    and no longer forces small business to rely exclusively on the
    Federal Register. In conclusion, Ms. Kraftician emphasized that
    in order for this legislation to work, public institutions must
    be held accountable for how they wield the authorities they are
    given. With respect to technology transfer, public agencies
    must be willing to make decisions and take risks.

                              V. Committee Actions

    Subcommittee Markup

        On March 26, 1998, the Technology Subcommittee convened to
    consider H.R. 2544, as introduced. Two amendments were offered
    and accepted by the Subcommittee. The Subcommittee approved an
    amendment offered by Mr. Barcia of Michigan and an amendment by
    Mr. Cook of Utah by voice vote. Both amendments reflected
    consensus revisions as requested by the Administration. With a
    quorum present, Mr. Barcia moved that H.R. 2544, as amended, be
    reported. The motion was adopted by voice vote.

    Committee Markup

        On May 13, 1998, the Science Committee convened to consider
    H.R 2544. An Amendment in the Nature of a Substitute, offered
    by Chairman Sensenbrenner of Wisconsin, was adopted by voice
    vote. The amendment made technical and conforming changes to
    H.R. 2544 and added Section 6 (Review of Cooperative Research
    and Development Agreement Procedures), sponsored by Mrs.
    Tauscher of California, to the bill. With a quorum present, Mr.
    Brown moved that H.R. 2544, as amended, be reported. The motion
    was adopted by voice vote.

                  VI. Summary of Major Provisions of the Bill

        The goal of H.R. 2544 is to remove the procedural obstacles
    and to the greatest extent possible, within the limits of the
    public interest, the uncertainty involved in the licensing of
    government-owned patented inventions created in a GOGO, by
    applying the successful GOCO provisions in the Bayh-Dole Act to
    a GOGO. In H.R. 2544, federal agencies would be provided with
    two important new tools for effectively commercializing on-the-
    shelf, government-owned inventions: (1) the bill's revised
    authorities of Section 209 of the Bayh-Dole Act; and (2) the
    ability to license technology as part of a CRADA. Both
    mechanisms make federal technology transfer programs much more
    attractive to United States private industries that seek to
    form partnerships with federal laboratories. H.R. 2544, as
    amended, also makes a number of smaller adjustments to the
    Bayh-Dole Act and the Stevenson-Wydler Act, which are designed
    to improve these laws, reflecting a series of consensus
    ``lessons learned'' during 18 years of experience in technology
    transfer.

                        VII. Section-by-Section Analysis

    SECTION 1. SHORT TITLE.

        The Act shall be called the ``Technology Transfer
    Commercialization Act of 1997.''

    SECTION. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

        Section 2 amends the Stevenson-Wydler Technology Innovation
    Act of 1980 by setting out the circumstances under which
    federal laboratories may license existing patented inventions
    as part of a Cooperative Research and Development Agreement
    (CRADA). The federal laboratory may, subject to Section 209 of
    title 35 of the United States Code, grant a license to a
    federally-owned invention, created prior to the granting of the
    license, if it is directly related to the scope of the work
    under the agreement.

    SECTION 3. LICENSING FEDERALLY OWNED INVENTIONS.

        Section 3 rewrites Section 209, title 35 of the United
    States Code preserving existing preferences while streamlining
    notice and other procedural requirements.
        Subsection 3(a) provides that a federal agency may grant an
    exclusive or partially exclusive license to a federally owned
    invention only if granting the license is a reasonable and
    necessary incentive for commercialization or to promote the
    invention's utilization by the public. The federal agency must
    find that the public will be served by the granting of the
    license, as indicated by the applicant's intentions, plans, and
    ability to bring the invention to practical application within
    a reasonable time or otherwise promote the invention's
    utilization by the public. The proposed scope of an exclusive
    or partially exclusive license should not be greater than
    reasonably necessary. The granting of the license should not
    substantially lessen competition or create or maintain a
    violation of the antitrust laws, and in the case of an
    invention covered by a foreign patent application or patent,
    must enhance interests of United States industry in foreign
    commerce.
        Subsection 3(b) provides that licenses should be granted
    only to a licensee who agrees that any products embodying the
    invention or produced through the use of the invention will be
    manufactured substantially in the United States.
        Subsection 3(c) provides that the first preference for the
    granting of licenses should be given to small businesses that
    have an equal or greater likelihood as other applicants to
    bring the invention to commercialization within a reasonable
    time.
        Subsection 3(d) provides certain terms and conditions
    required for licenses, as the granting agency considers
    appropriate. These include: retaining a nontransferable,
    irrevocable, paid-up license for a federal agency to practice
    the invention or have the invention practiced throughout the
    world by or on behalf of the United States; periodic reporting
    on the use of the invention and commercialization efforts by
    the licensee, but only to the extent necessary to enable the
    federal agency to determine whether the terms of the license
    are being complied with; and providing ``march-in rights'' that
    empower a federal agency to terminate the license, in whole or
    in part, if it determines that the licensee is not adequately
    executing its commitment to achieve practical utilization of
    the invention within a reasonable time, if the licensee is in
    breach of the substantial United States manufacture
    requirement, if termination is necessary to meet the public use
    requirements specified by federal regulations issued after the
    grant of the license, or if the licensee has been found by a
    competent authority to have violated federal antitrust laws.
        Subsection 3(e) provides that no exclusive or partially
    exclusive license may be granted unless public notice of the
    intention to grant such a license has been provided in an
    appropriate manner at least 15 days before the license is
    granted and the federal agency has considered all comments
    received in response to that public notice. Subsection 3(e),
    however, shall not apply to the licensing of inventions made
    under a CRADA entered into under Section 12 of the Stevenson-
    Wydler Technology Innovation Act of 1980 (15 U.S.C. 3710a).
        Section 3(f) provides that a federal agency may grant a
    license on a federally-owned invention only if the licensee has
    supplied a basic business plan with development milestones and/
    or commercialization milestones.
        Section 3(g) provides that any basic business plan
    submitted by an applicant for a license, and any report on the
    utilization of the invention, shall be treated as commercial
    and financial information and not subject to disclosure under
    the Freedom of Information Act.

    SECTION 4. TECHNICAL AMENDMENTS TO BAYH-DOLE ACT.

        Section 4 provides that a federal agency, employing a
    coinventor of any invention made under a funding agreement with
    a non-profit organization or small business, may consolidate
    rights in the invention to ease commercialization of the
    invention. Consolidation under Section 4 may occur either by a
    federal agency licensing or assigning rights or by the federal
    agency acquiring rights related to the invention.

    SECTION 5. TECHNICAL AMENDMENTS TO THE STEVENSON-WYDLER TECHNOLOGY
                        INNOVATION ACT OF 1980.

        Section 5 clears up an ambiguity in current law by
    providing that the rights of the inventors must be assigned to
    the Federal Government in order for the inventors to share
    royalties and that the federal agency may retain royalty income
    for 2 succeeding fiscal years.

    SECTION 6. REVIEW OF COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
                        PROCEDURES.

        Section 6 provides the Director of the Office of Science
    and Technology Policy (OSTP), in consultation with relevant
    national laboratories, shall review the general policies and
    procedures used by federal agencies to gather and consider the
    views of other agencies with respect to major proposed
    Cooperative Research and Development Agreements (CRADA) that
    involve critical national security technology or may have a
    significant impact on domestic or international
    competitiveness. Within 1 year after the date of enactment, the
    Director of OSTP, in consultation with relevant federal
    agencies and national laboratories, shall determine the
    adequacy of existing procedures and methods for interagency
    coordination and awareness, and establish and distribute to
    appropriate federal agencies specific criteria to indicate the
    necessity for gathering and considering the views of other
    agencies and additional procedures, if any, for carrying out
    such gathering and considering of agency views. Procedures
    established shall be designed to the extent possible to use or
    modify existing procedures, to minimize burdens on federal
    agencies, to encourage industrial partnerships with national
    laboratories, and to minimize delay in the approval or
    disapproval of collaborative relationship with federal
    laboratories and private industry.

                             VIII. Committee Views

    SECTION 1. SHORT TITLE.

        The Act may be cited as ``The Technology Transfer
    Commercialization Act of 1998.''

    SECTION. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

        The Committee recognizes the success of Cooperative
    Research and Development Agreements (CRADA) for federal
    technology transfer. Since the inception in 1986 of the CRADA
    legislation, over 2,000 have been signed, resulting in the
    transfer of technology, knowledge, and expertise back and forth
    between our federal laboratories and the private sector. The
    Committee believes that the broadening of CRADA licensing
    authority to include pre-existing inventions will make a CRADA
    more attractive to private industry and increase the transfer
    of federal technology.

    SECTION 3. LICENSING FEDERALLY OWNED INVENTIONS.

        While the Committee does not wish to delay the process of
    issuing exclusive or partially exclusive licenses, the
    Committee recognizes the importance of public notice. Public
    notice provides others knowledge of the proposed license and
    provides an opportunity to comment. The Committee understands
    that notice of this type has helped the federal agencies find
    additional or better licensees than those first proposed. The
    Committee is more concerned with the effectiveness of notice
    than its form; public notice should not be construed to require
    publication in the Federal Register. Other available forms,
    including electronic forms, of making public the intention to
    grant an exclusive or partially exclusive license on a
    federally owned invention should be pursued. The Committee
    strongly encourages federal agencies to use the Internet to
    meet the public notice requirement in the Act.
        The Committee also recognizes that requiring a basic
    business plan as part of the application for a license gives
    the federal agencies an objective basis for selecting the
    private industry firm best suited to commercialize the
    invention. The exercise of preparing the plan is also of
    considerable use in assisting companies, especially small
    businesses, in defining their own focus with respect to the
    invention; it also gives agencies valuable insights into the
    comparative abilities of companies competing for a single
    license and a more precise understanding of the specific field
    of use needed to execute a company's commercialization plan.
    The Committee strongly believes, however, the basic business
    plan should not be an overly burdensome bureaucratic
    requirement. A business plan under this section should not be
    required to include extraneous materials but rather should be
    specifically focused on providing the federal agency the
    information it needs to make licensing decisions and to
    understand the development and commercialization milestones the
    company plans to meet.
        The Committee believes that business plans submitted by a
    private industry in the licensing process, as well as progress
    reports under the license such as reports on utilization and
    utilization efforts should be treated by the federal agency as
    commercial and financial information not subject to the Freedom
    of Information Act and should be entitled to protection from
    disclosure. The Committee understands that, absent protection
    of its proprietary information, private industry would
    otherwise be very reluctant to partner with federal
    laboratories which would cause a chilling effect on federal
    technology licensing.

    SECTION 4. TECHNICAL AMENDMENTS TO BAYH-DOLE ACT.

        The Bayh-Dole Act defines the patent rights of small
    business and non-profit organizations receiving Federal
    Government funding. A significant percentage of government
    inventions are co-invented with federally-funded parties, most
    commonly university researchers. It is often necessary
    consolidate rights to such co-inventions, under appropriate
    licenses or assignments, to achieve public benefit through
    commercialization. Depending on the specific circumstances, it
    may be advantageous for the unified rights and patent
    prosecution responsibility to reside with either the co-
    inventing entity or the federal agency. The Committee believes
    that the Bayh-Dole Act should be amended to make it clear that
    both the agency and the co-inventing entity have authority to
    enter into license agreements with one another in these
    circumstances.
        While Bayh-Dole currently provides specific authority for
    the Federal Government to assign its rights in a subject co-
    invention to the co-inventing entity, it does not mention the
    licensing of such rights. The Committee understands that the
    absence of specific authority to license in those circumstances
    has resulted in inconsistent rulings by federal agencies, with
    some approving such licenses while others reject them. The
    Bayh-Dole Act is accordingly amended to provide a mechanism
    whereby the co-inventing entity can voluntarily transfer its
    rights by license or assignment to the federal agency in return
    for a share of any subsequent income.
        The Committee understands that it is increasingly necessary
    for an agency to be able to offer a potential licensee access
    to related inventions in order to practice a government-owned
    invention. There is, however, no mechanism whereby an agency
    can ``in-license'' the rights to related inventions, in return
    for the payment of a share of any subsequent royalties, so that
    they can be ``bundled'' with a government-owned invention and
    licensed together for commercialization. This section adds in
    such language.

    SECTION 5. TECHNICAL AMENDMENTS TO THE STEVENSON-WYDLER TECHNOLOGY
                        INNOVATION ACT OF 1980.

        The Committee understands that there have been widely
    differing federal agency interpretations regarding whether the
    rights of the inventors must be assigned to the Federal
    Government in order for them to share royalties. For example,
    some federal agencies share with all inventors even though they
    have not assigned their rights to the Federal Government, while
    others do not share with non-government inventors who have
    assigned their rights. Under this section, royalty shares will
    be due only after assignment of rights by the inventor or co-
    inventor.
        The Committee also understands that there is confusion on
    how long an agency may retain royalty income. Accordingly, the
    Committee clarified that federal agencies should be given 2
    fiscal years to retain royalty income before transferring
    outstanding royalty income, if any, to the general treasury.

    SECTION 6. REVIEW OF COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
                        PROCEDURES.

        The Committee is pleased with the blossoming of the CRADA
    concept into a major tool for industry-government cooperation.
    At the same time, the Committee has heard of concerns that
    major, far-reaching CRADA's may now have outgrown the current
    CRADA approval process. A CRADA, as envisioned at the time of
    the passage of the Federal Technology Transfer Act of 1986, was
    designed to help move individual ideas from the federal
    laboratories into the private sector or lead to cooperation
    between industry and government labs in areas of mutual
    interest. A common benefit of such agreements has been the
    acquisition by small businesses of the technological expertise
    necessary to succeed that otherwise may not have been available
    to them. These CRADA's are small enough that they do not raise
    national issues; therefore, the appropriate approval process is
    one which is executed quickly without high level signoffs. Most
    current CRADA's are still of this type and should be approved
    in the traditional manner.
        However, in recent years, a handful of major CRADA's have
    emerged which involve cutting edge technology, the world's
    largest companies, and occasionally consortia of federal
    laboratories. Some recent CRADA's are important enough that
    they have the potential to affect the future direction of
    entire industries including their suppliers. These CRADA's
    generally have a positive impact on the laboratories and
    companies which participate and should be encouraged. However,
    the issues raised by these major CRADA's if they involve
    critical national security technology (classified technology or
    technology subject to export controls), domestic
    competitiveness issues (competitive advantage for market
    leaders), or international competitiveness (participation by
    foreign companies or foreign suppliers) can go beyond the
    expertise of the laboratory's home agency.
        The Committee understands that there are instances where
    foreign participation and special relations with market leaders
    are desirable or even essential to the success of a CRADA, but
    other values within the jurisdiction of other agencies, like
    the effect on other U.S. companies and the impact on present
    and future jobs within the United States, must be considered.
    The Committee, therefore, believes that a careful review, and
    upgrading if necessary, of existing approval procedures for
    these major CRADA's with interagency consequences is in order.
        Section 6, therefore, instructs the Director of the White
    House Office of Science and Technology Policy to convene
    representatives of appropriate federal agencies such as the
    Office of Management and Budget, the Department of Defense, the
    Department of Energy, the Department of Commerce, the National
    Institutes of Health, and NASA and other affected parties to
    review current approval procedures for these major CRADA's.
    Special care is to be taken to understand the needs of private
    sector parties. OSTP is to identify criteria to separate out
    the small minority of major CRADA's which need interagency
    review from those which do not. For instance, it makes sense to
    review only the very largest CRADA's for domestic
    competitiveness issues. This review is to understand the
    procedures that currently apply to major CRADA's and the extent
    to which they lead to a satisfactory airing of national
    security, domestic competitiveness, and international
    competitiveness issues.
        Within 1 year of enactment, the Director of OSTP is to
    determine the adequacy of existing procedures and methods for
    interagency coordination and awareness and to use them as the
    starting point for procedures established under this section.
    The Director then is to establish and distribute to appropriate
    federal agencies specific criteria for triggering an
    interagency review and procedures for carrying out that review
    in an expeditious manner. The procedures are to reflect the
    needs of the private sector parties for prompt, binding
    decisions on CRADA's and the significant investments private
    sector partners commit to such endeavors. Existing procedures
    are to be used to the extent that they are appropriate. The
    purpose of these changes is to solve potential problems through
    better interagency coordination rather than to add layers of
    review. OSTP is to add new procedures only to the extent that
    existing procedures are inadequate, and to assure that any new
    procedures lead to expedited, substantive interagency decisions
    within the spirit of the CRADA concept. Section 6 does not
    modify any statutory deadlines for CRADA approval and does not
    grant authority to the OSTP or other agencies to establish a
    review board or other new bureaucratic structure to carry out
    this section.

                          IX. Committee Cost Estimate

        Clause 7(a) of Rule XIII of the Rules of the House of
    Representatives requires each Committee report accompanying
    each bill or joint resolution of a public character to contain:
    (1) an estimate, made by such Committee, of the costs which
    would be incurred in carrying out such bill or joint resolution
    in the fiscal year in which it is reported, and in each of the
    5 fiscal years following such fiscal year (or for the
    authorized duration of any program authorized by such bill or
    joint resolution, if less than 5 years); (2) a comparison of
    the estimate of costs described in subparagraph (1) of this
    paragraph made by such Committee with an estimate of such costs
    made by any government agency and submitted to such Committee;
    and (3) when practicable, a comparison of the total estimated
    funding level for the relevant program (or programs) with the
    appropriate levels under current law. However, clause 7(d) of
    that Rule provides that this requirement does not apply when a
    cost estimate and comparison prepared by the Director of the
    Congressional Budget Office under Section 403 of the
    Congressional Budget Act of 1974 has been timely submitted
    prior to the filing of the report and included in the report
    pursuant to clause 2(l)(3)(C) of Rule XI. A cost estimate and
    comparison prepared by the Director of the Congressional Budget
    Office under Section 403 of the Congressional Budget Act of
    1974 has been timely submitted prior to the filing of this
    report and included in Section X of this report pursuant to
    clause 2(l)(3)(C) of Rule XI.
        Clause 2(l)(3)(B) of Rule XI of the Rules of the House of
    Representatives requires each Committee report that accompanies
    a measure providing new budget authority (other than continuing
    appropriations), new spending authority, or new credit
    authority, or changes in revenues or tax expenditures to
    contain a cost estimate, as required by Section 308(a)(1) of
    the Congressional Budget Act of 1974 and, when practicable with
    respect to estimates of new budget authority, a comparison of
    the total estimated funding level for the relevant program (or
    programs) to the appropriate levels under current law. H.R.
    2544 does not contain any new budget authority, credit
    authority, or changes in revenues or tax expenditures. Assuming
    that the sums authorized under the bill are appropriated, H.R.
    2544 does authorize additional discretionary spending, as
    described in the Congressional Budget Office report on the
    bill, which is contained in Section X of this report.

                  X. Congressional Budget Office Cost Estimate

                                   Congressional Budget Office
                                                  U.S. Congress
                                          Washington, DC. 20515
                                      June E. O'Neill, Director

                                                           May 21, 1998
    Honorable F. James Sensenbrenner, Jr.,
    Chairman, Committee on Science,
    U.S. House of Representatives,
    Washington, DC. 20515

        Dear Mr. Chairman:
        The Congressional Budget Office has prepared the enclosed cost
    estimate for H.R. 2544, the Technology Transfer Commercialization Act
    of 1998.
        If you wish further details on this estimate, we will be pleased to
    provide them. The CBO staff contact is Kathleen Gramp, who can be
    reached at 226-2860.
    Sincerely,
                                                        June E. O'Neill

    Enclosure

    cc: Honorable George E. Brown, Jr., Ranking Minority Member
                                     ______

                   CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
                                  May 21, 1998
                                    H.R 2544
               Technology Transfer Commercialization Act of 1998
    As ordered reported by the House Committee on Science on May 13, 1998
        H.R. 2544 would amend existing law regarding the licensing of
    technologies developed with federal resources. This bill would change
    the terms and procedures governing such licenses and would expand the
    scope of inventions that could be included in a license. Royalties
    collected by federal agencies would be available for obligation for 2
    years after they are received rather than the one year allowed under
    current law. The bill also would direct the Office of Science and
    Technology Policy (OSTP) to analyze and recommend policies regarding
    major cooperative research and development agreements (CRADAs) within
    one year after enactment.
        CBO estimates that implementing H.R. 2544 would have no significant
    effect on the federal budget over the 1999-2003 period. Based on
    information from OSTP, we expect that preparing the report on CRADAs
    would involve little additional cost because most of the analyses
    required by the bill are being done under current law. Provisions
    affecting the collection and spending of royalties by federal agencies
    would affect direct spending, so pay-as-you-go procedures would apply
    to this bill, but CBO estimates that the effects would not be
    significant. Although receipts from royalties could increase if more
    licenses are issued as a result of this legislation, any additional
    collections would be offset by an increase in direct spending by
    agencies for payments to inventors or for related agency programs.
    Likewise, giving agencies an additional year to obligate royalty income
    would have little effect on direct spending, because agencies obligate
    virtually all of the receipts within the one-year limit specified in
    current law.
        H.R. 2544 contains no intergovernmental or private-sector mandates
    as defined in the Unfunded Mandates Reform Act of 1995 and would impose
    no costs on state, local, or tribal governments.
        The CBO staff contact for this estimate is Kathleen Gramp, who can
    be reached at 226-2860. This estimate was approved by Robert A.
    Sunshine, Deputy Assistant Director for Budget Analysis.

                      XI. Compliance with Public Law 104-4

        H.R. 2544 contains no unfunded mandates.

             XII. Committee Oversight Findings and Recommendations

        Clause 2(l)(3)(A) of Rule XI of the Rules of the House of
    Representatives requires each Committee report to include
    oversight findings and recommendations required pursuant to
    clause 2(b)(1) of Rule X. The Committee has no oversight
    findings.

       XIII. Oversight Findings and Recommendations by the Committee on
                        Government Reform and Oversight

        Clause 2(l)(3)(D) of Rule XI of the Rules of the House of
    Representatives requires each Committee report to contain a
    summary of the oversight findings and recommendations made by
    the House Government Reform and Oversight Committee pursuant to
    clause 4(c)(2) of Rule X, whenever such findings and
    recommendations have been submitted to the Committee in a
    timely fashion. The Committee on Science has received no such
    findings or recommendations from the Committee on Government
    Reform and Oversight.

                    XIV. Constitutional Authority Statement

        Clause 2(l)(4) of Rule XI of the Rules of the House of
    Representatives requires each report of a Committee on a bill
    or joint resolution of a public character to include a
    statement citing the specific powers granted to the Congress in
    the Constitution to enact the law proposed by the bill or joint
    resolution. Article I, Section 8 of the Constitution of the
    United States grants Congress the authority to enact H.R. 2544.

                    XV. Federal Advisory Committee Statement

        H.R. 2544 does not authorize the creation of any new
    advisory committees.

                     XVI. Congressional Accountability Act

        The Committee finds that H.R. 2544 does not relate to the
    terms and conditions of employment or access to public services
    or accommodations within the meaning of Section 102(b)(3) of
    the Congressional Accountability Act (Public Law 104-1).

          XVII. Changes in Existing Law Made by the Bill, as Reported

        In compliance with clause 3 of rule XIII of the Rules of
    the House of Representatives, changes in existing law made by
    the bill, as reported, are shown as follows (existing law
    proposed to be omitted is enclosed in black brackets, new
    matter is printed in italics, existing law in which no change
    is proposed is shown in roman):

    STEVENSON-WYDLER TECHNOLOGY INNOVATION ACT OF 1980

               *       *       *       *       *       *       *

    SEC. 12. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

        (a) * * *
        (b) Enumerated Authority.--(1) Under an agreement entered
    into pursuant to subsection (a)(1), the laboratory may grant,
    or agree to grant in advance, to a collaborating party patent
    licenses or assignments, or options thereto, in any invention
    made in whole or in part by a laboratory employee under the
    agreement, or, subject to section 209 of title 35, United
    States Code, may grant a license to an invention which is
    federally owned, made before the granting of the license, and
    directly related to the scope of the work under the agreement,
    for reasonable compensation when appropriate. The laboratory
    shall ensure, through such agreement, that the collaborating
    party has the option to choose an exclusive license for a pre-
    negotiated field of use for any such invention under the
    agreement or, if there is more than one collaborating party,
    that the collaborating parties are offered the option to hold
    licensing rights that collectively encompass the rights that
    would be held under such an exclusive license by one party. In
    consideration for the Government's contribution under the
    agreement, grants under this paragraph shall be subject to the
    following explicit conditions:
                (A) * * *

               *       *       *       *       *       *       *

    SEC. 14. DISTRIBUTION OF ROYALTIES RECEIVED BY FEDERAL AGENCIES.

        (a) In General.--(1) Except as provided in paragraphs (2)
    and (4), any royalties or other payments received by a Federal
    agency from the licensing and assignment of inventions under
    agreements entered into by Federal laboratories under section
    12, and from the licensing of inventions of Federal
    laboratories under section 207 of title 35, United States Code,
    or under any other provision of law, shall be retained by the
    laboratory which produced the invention and shall be disposed
    of as follows:
                (A)(i) The head of the agency or laboratory, or
            such individual's designee, shall pay each year the
            first $2,000, and thereafter at least 15 percent, of
            the royalties or other payments to the inventor or
            coinventors, if the inventor's or coinventor's rights
            are assigned to the United States.

               *       *       *       *       *       *       *

                (B) The balance of the royalties or other payments
            shall be transferred by the agency to its laboratories,
            with the majority share of the royalties or other
            payments from any invention going to the laboratory
            where the invention occurred. The royalties or other
            payments so transferred to any laboratory may be used
            or obligated by that laboratory during the fiscal year
            in which they are received or during the [succeeding
            fiscal year] 2 succeeding fiscal years--
                        (i) * * *

               *       *       *       *       *       *       *

                                  ----------

    TITLE 35, UNITED STATES CODE

               *       *       *       *       *       *       *

    PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS

               *       *       *       *       *       *       *

      CHAPTER 18--PATENT RIGHTS IN INVENTIONS MADE WITH FEDERAL ASSISTANCE

    Sec.
    200.    Policy and objective.
         * * * * * * *
    [209.    Restrictions on licensing of federally owned inventions.]
    209.    Licensing federally owned inventions.

               *       *       *       *       *       *       *

    Sec. 202. Disposition of rights

        (a) * * *

               *       *       *       *       *       *       *

        [(e) In any case when a Federal employee is a coinventor of
    any invention made under a funding agreement with a nonprofit
    organization or small business firm, the Federal agency
    employing such coinventor is authorized to transfer or assign
    whatever rights it may acquire in the subject invention from
    its employee to the contractor subject to the conditions set
    forth in this chapter.]
        (e) In any case when a Federal employee is a coinventor of
    any invention made under a funding agreement with a nonprofit
    organization or small business firm, the Federal agency
    employing such coinventor may, for the purpose of consolidating
    rights in the invention--
                (1) license or assign whatever rights it may
            acquire in the subject invention from its employee to
            the nonprofit organization or small business firm; or
                (2) acquire any rights in the subject invention,
            but only to the extent the party from whom the rights
            are acquired voluntarily enters into the transaction.

               *       *       *       *       *       *       *

    Sec. 207. Domestic and foreign protection of federally owned inventions

        (a) Each Federal agency is authorized to--
                (1) * * *
                (2) grant nonexclusive, exclusive, or partially
            exclusive licenses under federally owned [patent
            applications, patents, or other forms of protection
            obtained] inventions, royalty-free or for royalties or
            other consideration, and on such terms and conditions,
            including the grant to the licensee of the right of
            enforcement pursuant to the provisions of chapter 29 of
            this title as determined appropriate in the public
            interest;
                (3) undertake all other suitable and necessary
            steps to protect and administer rights to federally
            owned inventions on behalf of the Federal Government
            either directly or through contract, including
            acquiring rights for the Federal Government in any
            invention, but only to the extent the party from whom
            the rights are acquired voluntarily enters into the
            transaction, to facilitate the licensing of a federally
            owned invention; and

               *       *       *       *       *       *       *

    [Sec. 209. Restrictions on licensing of federally owned inventions

        [(a) No Federal agency shall grant any license under a
    patent or patent application on a federally owned invention
    unless the person requesting the license has supplied the
    agency with a plan for development and/or marketing of the
    invention, except that any such plan may be treated by the
    Federal agency as commercial and financial information obtained
    from a person and privileged and confidential and not subject
    to disclosure under section 552 of title 5 of the United States
    Code.
        [(b) A Federal agency shall normally grant the right to use
    or sell any federally owned invention in the United States only
    to a licensee that agrees that any products embodying the
    invention or produced through the use of the invention will be
    manufactured substantially in the United States.
        [(c)(1) Each Federal agency may grant exclusive or
    partially exclusive licenses in any invention covered by a
    federally owned domestic patent or patent application only if,
    after public notice and opportunity for filing written
    objections, it is determined that--
                [(A) the interests of the Federal Government and
            the public will best be served by the proposed license,
            in view of the applicant's intentions, plans, and
            ability to bring the invention to practical application
            or otherwise promote the invention's utilization by the
            public;
                [(B) the desired practical application has not been
            achieved, or is not likely expeditiously to be
            achieved, under any nonexclusive license which has been
            granted, or which may be granted, on the invention;
                [(C) exclusive or partially exclusive licensing is
            a reasonable and necessary incentive to call forth the
            investment of risk capital and expenditures to bring
            the invention to practical application or otherwise
            promote the invention's utilization by the public; and
                [(D) the proposed terms and scope of exclusivity
            are not greater than reasonably necessary to provide
            the incentive for bringing the invention to practical
            application or otherwise promote the invention's
            utilization by the public.
        [(2) A Federal agency shall not grant such exclusive or
    partially exclusive license under paragraph (1) of this
    subsection if it determines that the grant of such license will
    tend substantially to lessen competition or result in undue
    concentration in any section of the country in any line of
    commerce to which the technology to be licensed relates, or to
    create or maintain other situations inconsistent with the
    antitrust laws.
        [(3) First preference in the exclusive or partially
    exclusive licensing of federally owned inventions shall go to
    small business firms submitting plans that are determined by
    the agency to be within the capabilities of the firms and
    equally likely, if executed, to bring the invention to
    practical application as any plans submitted by applicants that
    are not small business firms.
        [(d) After consideration of whether the interests of the
    Federal Government or United States industry in foreign
    commerce will be enhanced, any Federal agency may grant
    exclusive or partially exclusive licenses in any invention
    covered by a foreign patent application or patent, after public
    notice and opportunity for filing written objections, except
    that a Federal agency shall not grant such exclusive or
    partially exclusive license if it determines that the grant of
    such license will tend substantially to lessen competition or
    result in undue concentration in any section of the United
    States in any line of commerce to which the technology to be
    licensed relates, or to create or maintain other situations
    inconsistent with antitrust laws.
        [(e) The Federal agency shall maintain a record of
    determinations to grant exclusive or partially exclusive
    licenses.
        [(f) Any grant of a license shall contain such terms and
    conditions as the Federal agency determines appropriate for the
    protection of the interests of the Federal Government and the
    public, including provisions for the following:
                [(1) periodic reporting on the utilization or
            efforts at obtaining utilization that are being made by
            the licensee with particular reference to the plan
            submitted: Provided, That any such information may be
            treated by the Federal agency as commercial and
            financial information obtained from a person and
            privileged and confidential and not subject to
            disclosure under section 552 of title 5 of the United
            States Code;
                [(2) the right of the Federal agency to terminate
            such license in whole or in part if it determines that
            the licensee is not executing the plan submitted with
            its request for a license and the licensee cannot
            otherwise demonstrate to the satisfaction of the
            Federal agency that it has taken or can be expected to
            take within a reasonable time, effective steps to
            achieve practical application of the invention;
                [(3) the right of the Federal agency to terminate
            such license in whole or in part if the licensee is in
            breach of an agreement obtained pursuant to paragraph
            (b) of this section; and
                [(4) the right of the Federal agency to terminate
            the license in whole or in part if the agency
            determines that such action is necessary to meet
            requirements for public use specified by Federal
            regulations issued after the date of the license and
            such requirements are not reasonably satisfied by the
            licensee.]

    Sec. 209. Licensing federally owned inventions

        (a) Authority.--A Federal agency may grant an exclusive or
    partially exclusive license on a federally owned invention only
    if--
                (1) granting the license is a reasonable and
            necessary incentive to--
                        (A) call forth the investment capital and
                    expenditures needed to bring the invention to
                    practical application; or
                        (B) otherwise promote the invention's
                    utilization by the public;
                (2) the Federal agency finds that the public will
            be served by the granting of the license, as indicated
            by the applicant's intentions, plans, and ability to
            bring the invention to practical application or
            otherwise promote the invention's utilization by the
            public, and that the proposed scope of exclusivity is
            not greater than reasonably necessary to provide the
            incentive for bringing the invention to practical
            utilization, as proposed by the applicant, or otherwise
            to promote the invention's utilization by the public;
                (3) the applicant makes a commitment to achieve
            practical utilization of the invention within a
            reasonable time;
                (4) granting the license will not tend to
            substantially lessen competition or create or maintain
            a violation of the Federal antitrust laws; and
                (5) in the case of an invention covered by a
            foreign patent application or patent, the interests of
            the Federal Government or United States industry in
            foreign commerce will be enhanced.
        (b) Manufacture in United States.--A Federal agency shall
    normally grant a license to use or sell any federally owned
    invention in the United States only to a licensee who agrees
    that any products embodying the invention or produced through
    the use of the invention will be manufactured substantially in
    the United States.
        (c) Small Business.--First preference for the granting of
    any exclusive or partially exclusive licenses under this
    section shall be given to small business firms having equal or
    greater likelihood as other applicants to bring the invention
    to practical application within a reasonable time.
        (d) Terms and Conditions.--Licenses granted under this
    section shall contain such terms and conditions as the granting
    agency considers appropriate. Such terms and conditions shall
    include provisions--
                (1) retaining a nontransferrable, irrevocable,
            paid-up license for the Federal agency to practice the
            invention or have the invention practiced throughout
            the world by or on behalf of the Government of the
            United States;
                (2) requiring periodic reporting on utilization of
            the invention, and utilization efforts, by the
            licensee, but only to the extent necessary to enable
            the Federal agency to determine whether the terms of
            the license are being complied with; and
                (3) empowering the Federal agency to terminate the
            license in whole or in part if the agency determines
            that--
                        (A) the licensee is not executing its
                    commitment to achieve practical utilization of
                    the invention, including commitments contained
                    in any plan submitted in support of its request
                    for a license, and the licensee cannot
                    otherwise demonstrate to the satisfaction of
                    the Federal agency that it has taken, or can be
                    expected to take within a reasonable time,
                    effective steps to achieve practical
                    utilization of the invention;
                        (B) the licensee is in breach of an
                    agreement described in subsection (b);
                        (C) termination is necessary to meet
                    requirements for public use specified by
                    Federal regulations issued after the date of
                    the license, and such requirements are not
                    reasonably satisfied by the licensee; or
                        (D) the licensee has been found by a
                    competent authority to have violated the
                    Federal antitrust laws in connection with its
                    performance under the license agreement.
        (e) Public Notice.--No exclusive or partially exclusive
    license may be granted under this section unless public notice
    of the intention to grant an exclusive or partially exclusive
    license on a federally owned invention has been provided in an
    appropriate manner at least 15 days before the license is
    granted, and the Federal agency has considered all comments
    received in response to that public notice. This subsection
    shall not apply to the licensing of inventions made under a
    cooperative research and development agreement entered into
    under section 12 of the Stevenson-Wydler Technology Innovation
    Act of 1980 (15 U.S.C. 3710a).
        (f) Basic Business Plan.--A Federal agency may grant a
    license on a federally owned invention only if the person
    requesting the license has supplied to the agency a basic
    business plan with development milestones, commercialization
    milestones, or both.
        (g) Nondisclosure of Certain Information.--Any basic
    business plan, and revisions thereto, submitted by an applicant
    for a license, and any report on the utilization or utilization
    efforts of a licensed invention submitted by a licensee, shall
    be treated by the Federal agency as commercial and financial
    information obtained from a person and not subject to
    disclosure under section 552 of title 5, United States Code.

               *       *       *       *       *       *       *

                        XVIII. Committee Recommendations

        On May 13, 1998, a quorum being present, the Committee
    favorably reported H.R. 2544, the Technology Transfer
    Commercialization Act of 1998, by a voice vote, and recommends
    its enactment.

                   XIX. Exchange of Committee Correspondence

                   XX. Proceedings of the Subcommittee Markup

           SUBCOMMITTEE MARKUP OF H.R. 2544, THE TECHNOLOGY TRANSFER
                             COMMERCIALIZATION ACT

                                  ----------

                            THURSDAY, MARCH 26, 1998

                 U.S. House of Representatives,
                                  Committee on Science,
                                    Subcommittee on Technology,
                                                        Washington, DC.
        The Subcommittee met at 10:12 a.m., in room 2318 of the
    Rayburn House Office Building, Hon. Constance A. Morella,
    Chairwoman of the Subcommittee, presiding.
        Mrs. Morella. Good morning, everybody. Pursuant to notice,
    the Subcommittee on Technology is meeting today to consider the
    following measures: H.R. 2544, which is a bill to improve the
    ability of federal agencies to license federally owned
    inventions; and H.R. 3007, the Commission on the Advancement of
    Women in Science, Engineering, and Technology Development Act.
        I ask unanimous consent of this Subcommittee for the
    authority to recess at anytime. If there is no objection, I
    need to have somebody offer--hearing no objection, it is so
    ordered.
        So, welcome everybody to today's markup of the two bills
    that I have mentioned, that have received very strong support
    in legislative hearings before our Subcommittee.
        This morning, we're going to consider H.R. 2544, the
    Technology Transfer Commercialization Act, which is a bill to
    improve the ability of federal agencies to license federally
    owned inventions, and, as I mentioned H.R. 3007, the Commission
    on the Advancement of Women in Science, Engineering, and
    Technology Development Act.
        Our first bill, H.R. 2544, continues the Science
    Committee's long and rich history of advancing technology
    transfer from our federal laboratories to help boost United
    States international competitiveness.
        As a result of technology transfer legislation advanced by
    this Committee, in almost 2 decades, the ability of the United
    States to compete in the global marketplace has been
    strengthened, a new paradigm for greater collaboration among
    the scientific enterprises that conduct our Nation's research
    and development--government, industry, and universities--has
    been developed. As a result, the quality of life for the
    American people, we believe, has been improved.
        By spinning off and commercializing technology developed in
    our Nation's over 700 federal laboratories, the result of our
    federal research and development enterprise are used today to
    enhance our ability to compete in the global marketplace.
        In two legislative hearings on H.R. 2544, witnesses
    enthusiastically endorsed the bill's intent to streamline
    technology licensing to make it more effective.
        The bill removes the legal obstacles to effectively license
    federally-owned inventions created in government-owned,
    government-operated laboratories by adopting the successful
    Bayh-Dole Act as a framework.
        Under the bill, agencies would be provided with two
    important new tools for effectively commercializing on-the-
    shelf, federally-owned technologies, either licensing them as
    stand-alone inventions under the bill's revised authorities of
    Section 209 of the Bayh-Dole Act, or by including them as a
    part of a larger package under the Cooperative Research and
    Development Agreement.
        In so doing, this will make both mechanisms much more
    attractive to U.S. companies that are striving to form
    partnerships with federal laboratories.
        I think that H.R. 2544 is yet another important step in
    refining our Nation's technology transfer laws to remove
    existing impediments to enhance government and industry
    collaboration.
        As we have prepared this bill for today's markup, I'm
    pleased to have worked very closely with Ranking Member Barcia,
    and Mr. Cook of Utah, as well as the Administration, to fashion
    consensus revisions to the original bill that incorporate
    suggestions made by the affected parties.
        Mr. Barcia and Mr. Cook will be offering amendments to H.R.
    2544 which will reflect the consensus revisions this morning.
        I appreciate the Administration's strong support for the
    bill's goal of simplifying the requirements imposed on federal
    laboratories in the licensing of their inventions, and I can
    assure the Administration that their views and their proposed
    amendments were sufficiently considered.
        This Committee's previous technology transfer efforts have
    been successful, in part because of the collaboration and
    bipartisan nature of the legislation, and the result of today's
    markup should be no different.
        The second bill under consideration today is H.R. 3007, the
    Advancement of Women in Science, Engineering, and Technology
    Development Act. Currently eight Science Committee members are
    cosponsors of the bill; others can certainly join in today.
        I would like to especially thank the Subcommittee members
    who are cosponsors, for their strong support of women in the
    science, engineering and technology fields:
        Our Subcommittee Vice Chairman, Gil Gutknecht, who has done
    yeoman's work on the bill, our Ranking Member, Jim Barcia, Full
    Committee Vice Chair, Vern Ehlers, Congressman Tom Davis,
    Congresswoman Debbie Stabenow.
        In addition to these distinguished members of the
    Subcommittee, the Institute of Electrical and Electronics
    Engineers, the IEEE, the American Society of Mechanical
    Engineers, ASME, the American Chemical Society, the American
    Association of Engineering Societies, Women in Technology, and
    the Association of Women in Science, have all endorsed the
    bill.
        The bill, as drafted, will establish a Commission on Women
    in Science, Engineering, and Technology Development. This
    Commission will identify and examine the number of women in the
    fields of science, engineering, and technology, and the
    specific occupations where they are underrepresented.
        The Commission also will describe the practices and
    policies of employers relating to the recruitment, retention,
    and advancement of women in science, engineering, and
    technology.
        The Commission will then determine if these practices and
    policies are comparable to their male counterparts, and issue
    recommendations to government, academia, and private industry,
    based on successful programs.
        H.R. 3007 will be a first step in countering the roadblocks
    for women in our rapidly evolving high-tech society. The bill
    will help women break through that glass ceiling, as well as
    the silicon ceiling, and it will help the Nation's high-tech
    economy to continue to flourish in the 21st Century by ensuring
    we have a sufficient pool of trained, high-tech workers in the
    United States.
        Countering the barriers for women in the fields of science,
    engineering, and technology development will bring our Nation
    closer to creating a highly effective, high-tech workforce
    which, in turn, will both help women and promote economic
    prosperity.
        During the markup, I will offer a substitute amendment to
    streamline the Commission process by: One, requiring the
    Commission to be appointed in 90, not 180 days; second, giving
    the Commission 1 year, not 18 months, to report; third,
    terminating the Commission 30 days, not 1 year after it
    reports; fourth, reducing the size of the Commission from 18 to
    11 members; and, fifth, replacing a requirement that the
    National Science Foundation conduct a study, with language that
    would require NSF to transmit the data it currently collects to
    the Commission.
        In addition, the substitute will ensure that the States are
    active participants in the Commission by allowing the National
    Governors Association's Chairman and Vice Chairman to appoint 4
    of the 11 Commissioners, and by requiring the Commission's
    report be transmitted to all 50 States, the District of
    Columbia, and the U.S. Territories.
        Finally, the substitute includes the phrase,
    nondiscriminatory, in its description of what kinds of
    recommendations we expect from the Commission.
        During our hearing on March 10th of this year, all our
    witnesses stressed that quotas were not the answer, not a
    viable solution to the problem of the underrepresentation of
    women in the scientific and engineering fields.
        The purpose of this Commission is to lift women scientists
    and engineers up, not drag men down by discriminating against
    them. As a supporter of affirmative action, but an opponent of
    quotas, I'm interested in increasing the pool of qualified
    high-tech workers in America by increasing the number of women
    in science and engineering.
        The recommendations that come out of H.R. 3007 should do
    just that, not simply change the ratio of men to women in the
    field. In addition to the substitute amendment, we have cleared
    five Democrat amendments to the bill which are all consistent
    with the bill's purpose, and so I now turn, after that lengthy
    introduction, to the Technology Subcommittee Ranking Member,
    the gentleman from Michigan, Mr. Barcia, for his opening
    statement.
        Mr. Barcia. Thank you very much, Madam Chairwoman. I have
    no statement at this time, but will be making remarks on the
    bills before the Subcommittee in a few minutes.
        Mrs. Morella. Thank you, Mr. Barcia.
        Are there any other members seeking recognition for an
    opening statement on the bills?
        [No response.]
        Mrs. Morella. Hearing none, then we'll now consider H.R.
    2544, a bill to improve the ability of federal agencies to
    license federally-owned inventions.
        Mr. Barcia, would you like to make a statement at this
    point?
        Mr. Barcia. Madam Chairwoman, I might reserve some time
    later. I understand one of our members may have a conflict in
    Committees.
        Mrs. Morella. The first reading of the bill, I would ask
    unanimous consent that the bill be considered as read and open
    to amendment at any point.
        There are two amendments on the roster. Are there any
    members who wish to offer an amendment?
        Mr. Cook. Yes.
        Mrs. Morella. I recognize Mr. Cook.
        Mr. Cook. Madam Chairwoman, I have an amendment at the
    desk.
        Mrs. Morella. The gentleman is recognized for 5 minutes to
    offer the amendment.
        [The text of H.R. 2544, a section-by-section analysis of
    the bill, the amendment roster, and the text of the amendments
    follow:]

        Mr. Cook. Thank you. I want to thank you, Madam Chairwoman,
    for your commitment and leadership in improving our Nation's
    laws promoting technology transfer from our Nation's federal
    laboratories.
        This technology transfer has the potential for bolstering
    our ability to compete internationally, and I commend you for
    your efforts on behalf of H.R. 2544.
        You've assembled endorsements for the bill from an
    impressive array of large industry, small business, technology
    transfer organizations, and the Administration, and I'm very
    pleased to support your bill as it is considered by the
    Committee.
        As a former businessman, I understand how difficult it is
    to interact with the government. This is especially onerous in
    our technology transfer laws when we're trying to attract
    incentives for industry to partner with government and not to
    create additional reasons for them to run away from working
    with government.
        For that reason, I'm offering a set of en bloc amendments
    to H.R. 2544, which I believe will further knock down some of
    the obstacles and concerns of industry when they seek to
    license technology from our federal laboratories.
        First, my amendment would underscore that at a minimum, the
    development plan required under the current law should simply
    be a basic business plan with commercialization milestones.
        My amendment would also extend the protection from
    disclosure by the industry partner of information submitted by
    private properties in connection with licensing. I believe that
    all such information, with the exception of the name of the
    licensee and type of such license, should be entitled to
    protection from disclosure.
        My amendment also allows for an agency to be able to offer
    a potential licensee access to related inventions in order to
    practice a government-owned invention.
        Although federal law addresses the issue of out-licensing
    of government owned inventions or rights thereto, there is no
    specific governmentwide authority for the opposite transaction,
    for example, to authorize an agency to in-license or accept an
    assignment of rights from a nongovernment party.
        Unfortunately, relatively few inventions can be
    commercialized without access to related inventions. However,
    there is presently no mechanism whereby an agency, with the
    exception of the Department of Commerce, can in-license the
    rights to other inventions in return for the payment of a share
    of any subsequent royalties so that they can be bundled with a
    government-owned invention and licensed together for
    commercialization.
        Finally, my amendment makes it clear that both the agency
    and an co-inventing entity should have authority to license to
    one another in those circumstances.
        This is important because a significant percentage of
    government inventions are co-invented with federally funded
    parties, most commonly, university researchers, and it's often
    necessary to unify ownership of such co-inventions under
    appropriate royalty-sharing arrangements such as licensing or
    assignments to achieve public benefit through
    commercialization.
        Madam Chairwoman, thank you for the opportunity to work
    with you in crafting these en bloc amendments to H.R. 2544, and
    I believe my amendment complements your bill, and I appreciate
    your consideration.
        I urge all of my colleagues to support this amendment.
        Mrs. Morella. Thank you, Mr. Cook. I would agree.
        Does any other member seek recognition on that amendment
    offered by Mr. Cook, en bloc?
        [No response.]
        Mrs. Morella. Not hearing any, then the vote is going to
    occur on the amendment.
        All in favor, say aye.
        [Chorus of ayes.]
        Mrs. Morella. Those opposed, no.
        [No response.]
        Mrs. Morella. The ayes have it, and the amendment is agreed
    to.
        Do we have another amendment?
        Mr. Barcia?
        Mr. Barcia. Yes, Madam Chairwoman, I have an amendment at
    the desk, an en bloc amendment.
        Mrs. Morella. The amendment can be considered as read, and
    the gentleman has 5 minutes to explain his en bloc amendment.
        Mr. Barcia. Thank you very much, Madam Chairwoman.
        While we all agree with H.R. 2544's goals in making sure
    that the products in federal labs are commercialized as quickly
    and efficiently as possible, there was widespread concern about
    the price that H.R. 2544, as introduced, extracted for that
    efficiency.
        I am happy to report that we have been able to develop a
    bipartisan compromise which keeps the beneficial portions of
    H.R. 2544, while restoring provisions designed to promote
    fairness of opportunity, to increase due diligence on the part
    of licensees, and to create American jobs.
        Notice requirements, which my amendment will restore, are
    essential to ensure that the public gets full benefit from its
    research investment. They, and the requirement that exclusive
    licenses be drawn as narrowly as possible, make sure that every
    American company, no matter how small, has a chance to make its
    case for a license before exclusive rights are awarded.
        NIST Director Ray Kammer's testimony last week vividly
    portrayed why these parts of my amendment are necessary. Time
    and time again, public notice of the intent to grant exclusive
    licenses has produced dramatic results.
        Companies, often small businesses, previously unknown to
    the laboratory with the innovation, have responded to the
    notice with revolutionary ideas which otherwise could have been
    lost.
        The National Institutes of Health first learned of
    companies with the capability to turn two NIH innovations into
    a cystic fibrosis gene therapy, and the cervical cancer vaccine
    this way.
        Agriculture uncovered an important way of immunizing
    poultry, and a way to make formaldehyde out of permanent press
    cotton fabrics after giving notice, yet these innovations could
    have been stopped in their tracks, had the public notice not
    been given.
        This amendment, however, is not a status quo amendment. It
    retains the Chairwoman's innovations, including shortening the
    period of public notice. I hope the report language will
    reflect the Committee's consensus that an effective 21st
    Century notice has to include the Internet.
        My amendment, when coupled with Mr. Cook's amendment, also
    restores planning requirements under the act to a reasonable
    level.
        Balance is necessary here. It is unfair to business if
    laboratories which license technologies are permitted to
    establish unnecessary paperwork requirements.
        It is also unfair to the taxpayer if licenses are awarded
    without enough information to tell who has the best ideas for
    commercial products based on the innovation, and which
    companies have the ability to take those ideas to market.
        Agencies also have legitimate needs for specific
    information on a company's performance under a license. My
    amendment is clear that we want reports to be lean, timely, and
    targeted, and as unobtrusive as possible.
        Finally, federal licensing must lead to high quality
    research and manufacturing jobs, right here in the United
    States of America. In the 1980's, this Committee showed wisdom
    in requiring a fair share of the jobs coming out of federal
    innovations to be located in the United States. My amendments
    will continue this important principle into the next century.
        Madam Chairwoman, you know and I know that the
    Administration did us a major favor in putting such a high
    level of effort into perfecting H.R. 2544. Every federal agency
    with major research laboratories, including NIH, USDA, FDA,
    EPA, DOD, DOE, NASA, NOAA, and NIST, were involved in
    developing the Administration's views.
        This Subcommittee, in a bipartisan manner, has invested a
    large amount of energy in gathering the information necessary
    to perfect the Administration's suggestions. It is now time to
    reap the harvest.
        I urge my colleagues to support the en bloc amendments, and
    I want to commend the Chairwoman for her diligent effort on
    perfecting this very progressive legislation.
        Mrs. Morella. Thank you, Mr. Barcia, and thank you for that
    excellent input in offering the amendments.
        Is there any further discussion to the en bloc amendments
    offered by Mr. Barcia?
        [No response.]
        Mrs. Morella. Not hearing any, the vote occurs on the
    amendment.
        All in favor of the amendments offered by Mr. Barcia will
    say aye.
        [Chorus of ayes.]
        Mrs. Morella. Those opposed, no.
        [No response.]
        Mrs. Morella. The ayes have it, and the amendment is agreed
    to.
        Are there any other amendments to come before the
    Subcommittee?
        [No response.]
        Mrs. Morella. I'd like to recognize Ms. Stabenow for any
    comment she may have.
        Ms. Stabenow. Thank you, Madam Chairwoman. I have just a
    brief comment in support of H.R. 2544, and also to indicate
    that in testimony and again today, we have heard comments about
    the importance in the area of agriculture of technology
    transfer.
        I would just like to emphasize, as a member of the
    Agriculture Committee, the Research Subcommittee, as the
    sponsor of the Safe Food Action Plan, which is in the
    Agriculture Committee, it is incredibly important to be
    focusing on research and technology transfer, developing new
    tools for farmers, for processors, in order to protect our food
    supply.
        This particular bill is an important step, and it works in
    tandem with the Safe Food Action Plan that we have introduced
    in the Agriculture Committee, and I think it's important that
    we have strengthened the technology transfer piece as it
    relates to our ability to protect our food.
        So, I would like to commend you, and I look forward to the
    opportunity to seeing this particular bill work in tandem with
    a number of different efforts as we look at the importance of
    research and transferring our technologies to practical use.
        Thank you.
        Mrs. Morella. Thank you, Ms. Stabenow, and thank you for
    indicating that linkage, the connection with the example in
    terms of food safety.
        I'd like to recognize Ms. Tauscher.
        Ms. Tauscher. Thank you, Madam Chairwoman. I appreciate
    your leadership on this important issue of technology transfer.
        This legislation is a positive step towards enhancing
    opportunities for moving technologies developed in our national
    laboratories into the marketplace where they will benefit all
    Americans.
        I had intended to offer today, an amendment to this
    legislation regarding the criteria used by the Department of
    Energy and other federal agencies to evaluate proposed
    Cooperative Research and Development Agreements.
        It is essential that the federal agencies provide proper
    oversight of CRADA's that the laboratories enter into with
    private business, but it is equally important that the
    oversight not unduly delay the approval of CRADA's.
        I will not offer this amendment today because I understand
    that some people have expressed concern about its wording.
    Instead, I would like to reserve the right to offer this
    amendment at the Full Committee markup of this bill, and I ask
    the Chair for her assistance in working out acceptable language
    as we move to Full Committee for consideration.
        Thank you.
        Mrs. Morella. Ms. Tauscher, we'll certainly consider it,
    and look forward to working with you on that.
        Are there any other amendments to be offered?
        [No response.]
        Mrs. Morella. Not hearing any, then the question is on the
    bill, H.R. 2544, a bill to improve the ability of federal
    agencies to license federally owned inventions, as amended.
        All those in favor will say aye.
        [Chorus of ayes.]
        Mrs. Morella. All opposed will say no.
        [No response.]
        Mrs. Morella. In the opinion of the Chair, the ayes have
    it.
        I'd like to now recognize the honorable Ranking Member, Mr.
    Barcia, for a motion.
        Mr. Barcia. Madam Chairwoman, I ask unanimous consent that
    the staff be instructed to make technical and conforming
    corrections to H.R. 2544.
        Also, I move that the Subcommittee report the bill, as
    amended, and that the Chairwoman take all necessary steps to
    bring the bill before the Full Committee for consideration.
        Thank you.
        Mrs. Morella. Thank you, Mr. Barcia. The Subcommittee has
    heard the motion.
        Those in favor will say aye.
        [Chorus of ayes.]
        Mrs. Morella. Those opposed, no.
        [No response.]
        Mrs. Morella. The ayes have it, and the motion is agreed to
    without objection. The motion to reconsider is laid upon the
    table.
                 XXI. Proceedings of the Full Committee Markup

                       FULL COMMITTEE MARKUP OF H.R. 2544

                                  ----------

                            WEDNESDAY, MAY 13, 1998

                 U.S. House of Representatives,
                                  Committee on Science,
                                                        Washington, DC.
        Chairman Sensenbrenner. The next order of business is H.R.
    2544, the Technology Transfer Commercialization act of 1997.
    And the Chair will recognize himself for a brief opening
    statement.
        In the past 2 decades, Congress by direction of the Science
    Committee has established a system to transfer and
    commercialize technology from our federal laboratories to
    bolster our Nation's ability to compete in the global market
    place. From the Stevenson-Wydler Technology Innovation Act of
    1980 to the National Technology Transfer and Advancement Act of
    1995, the Committee has strengthened and improved the process
    of technology transfer from our federal labs. This bill
    continues the Science Committee's long and rich history of
    advancing technology transfer to help boost the United States
    international competitiveness.
        I congratulate the Chairwoman of the Technology
    Subcommittee, the gentlewoman from Maryland, Mrs. Morella, for
    introducing this bill and for her efforts to work cooperatively
    with members of the Minority in the Administration to craft
    this bill.
        I am pleased that the Administration has informed us of
    their strong support for the bill's goal of simplifying the
    requirements imposed on the federal labs, and the licensing of
    their inventions. Shortly, I will be offering an amendment to
    H.R. 2544, which reflects technical corrections to the bill as
    suggested by the Administration and includes language affecting
    cooperative research and development agreements suggested by
    Ms. Tauscher of California.
        This bill is yet another important step in refining our
    Nation's technology transfer laws, to remove existing
    impediments to advance government and industry collaboration
    and I urge its adoption.
        Does the gentlewoman from Maryland have any opening
    comments for the remainder of my 5 minutes?
        Mrs. Morella. Yes, Mr. Chairman. I do. And I'll talk
    quickly, because it is a good bill.
        As a result of technology transfer legislation advanced by
    this Committee, in almost 2 decades, the ability of the United
    States to compete globally has, indeed, been strengthened in a
    new paradigm for a greater collaboration among the scientific
    enterprises that conduct our Nation's research and
    development--government industry and academia has been
    developed. By spinning off and commercializing technology
    developed in our Nation's over 700 federal laboratories, the
    results of our federal research and development enterprises as
    successfully being used today to improve our ability to compete
    internationally.
        Given the importance and benefits of technology transfer,
    the Technology Subcommittee has continued to refine the
    technology transfer process to facilitate greater government,
    university, and industry collaboration. In the past Congress,
    we enhanced and simplified the process for CRADAs with the
    National Technology Transfer and Advancement Act, and now in
    H.R. 2544 we have attempted to remove the obstacles to
    effectively license federally-owned inventions which are
    created in government-owned, government-operated laboratories
    by adopting this successful Bayh-Dole Act as a framework.
        So under the bill, agencies would be provided with two
    important new tools for effectively commercializing on the
    shelf federally-owned technologies. Either licensing them as
    stand-alone inventions under the bill's revised authorities of
    Section 209 of the Bayh-Dole Act, or by including them as part
    of a larger package under a cooperative research and
    development agreement. So by doing that, this will make both
    mechanisms much more attractive to our companies that are
    striving to form partnerships with federal laboratories.
        In the Technology Subcommittee's two legislative hearings
    on this bill, H.R. 2544, the witnesses all enthusiastically
    endorsed the bill's intent to streamline technology licensing,
    to make it more effective. We've heard from the Administration,
    as you mentioned, large corporations, small businesses, federal
    laboratories, and tech transfer organizations, among others,
    that this bill is really going to improve the process.
        I'm pleased that the bill is now before the Committee as we
    push toward its enactment by the close of this Congress. And
    Chairman Sensenbrenner, you will be offering an amendment on
    our behalf, which further clarifies the intent of the bill and
    refines certain language in the bill.
        So, I'm pleased that we've worked closely with the members
    of the Minority to reach the consensus revisions since the bill
    was originally introduced. I want to thank all of the members
    of the Technology Subcommittee. I look forward to working with
    the Full Committee and with you Mr. Chairman, and having H.R.
    2544 signed into law in the coming months.
        Chairman Sensenbrenner. My time is expired. The Chair
    recognizes the gentleman from California for an opening
    statement. And without objection, the text of all member's
    opening statements will appear in the record following the
    gentleman from California's time.
        Mr. Brown of California. Mr. Chairman, I would like to
    compliment the Subcommittee and Mrs. Morella and Mr. Barcia, in
    particular, for their diligence in bringing this before us
    today. And for your flexibility in working out the differences
    in the legislation. The law of federal inventions may very well
    be the most difficult area of the law that this Committee deals
    with and I commend my colleagues for having the endurance to
    get the legislation this far. We now have a compromise text
    which I hope the entire Committee can support.
        Mr. Chairman, I ask unanimous consent that any statement
    from Mr. Barcia be entered into the record following mine.
        Chairman Sensenbrenner. Without objection.
        Mr. Brown of California. I ask unanimous consent that the
    full text of my statement be entered in the record. And I'd
    like to commend Ms. Tauscher for her very important
    contribution to the Amendment in the Nature of a Substitute.
    Her amendment deals with that small group of cooperative
    research and development agreements which are so important that
    they affect policies of more than one agency in either national
    security, domestic competitiveness, or international
    competitiveness. I feel that Ms. Tauscher has come up with an
    unobtrusive way to address these concerns, and I therefore
    commend here for her keen understanding of these issues and her
    diligence on behalf of our Nation's laboratories.
        Mr. Chairman if you will indulge me for just another short
    period. I recall when this Act--Technology Transfer Act--was
    originally adopted, it bears the name of a distinguished senior
    Senator, Mr.--Senator Stevenson. Not the present Senator
    Stevenson but an earlier one, Adlie Stevenson, Jr. And the name
    of the Ranking Member of this Committee, Mr. Wydler, who worked
    diligently to insure the passage to this Act in its original
    form. I was proud to be a co-sponsor then and I'm proud that it
    has been as successful as it has in forging a better
    cooperation between the Federal Government and its research
    activities, and the private sector and their research
    activities.
        Chairman Sensenbrenner. The gentleman's time has expired.
        Without objection, the bill will be considered as read, and
    the Amendment in the Nature of a Substitute reported by the
    Committee--Subcommittee--on Technology will be considered as
    the original text of the bill for purposes of amendment. The
    bill is now open for amendment. Without objection, the bill
    will be open for amendment at any point. And I would like to
    offer an Amendment in the Nature of a Substitute which has been
    agreed upon.
        [The prepared statements of Mr. Brown and Mr. Barcia and
    the amendment roster and the text of the amendments follow:]

        Chairman Sensenbrenner. The Clerk will report the Amendment
    in the Nature of a Substitute.
        The Clerk. ``Amendment in the Nature of a Substitute to
    H.R. 2544, offered by Mr. Sensenbrenner.
        ``Strike''----
        Chairman Sensenbrenner. Without objection, the Amendment in
    the Nature of a Substitute is considered as read and open for
    amendment at any point and the Chair recognizes himself for 5
    minutes.
        This amendment incorporates technical revisions as
    suggested by the Administration to the text of the bill as
    reported out by the Subcommittee on Technology. I am offering
    this amendment with Mrs. Morella, the Chairwoman of the
    Subcommittee on Technology. The amendment, in part, clarifies
    certain requirements applied to exclusive and partially
    exclusive licenses; clarifies that in deciding whether to
    license exclusively or partially exclusively, consideration
    should be given to Federal Government interest or whether the
    interests of the United States industry and foreign commerce
    will be enhanced; clarifies that an agency co-owner may
    exclusively license its undivided interest to the other co-
    owner in lieu of an assignment; clarifies the bill's intention
    of enabling an agency to license inventions whether or not they
    are covered by a patent or application for a patent; and
    clarifies that any business plan and any reports submitted by a
    licensee relating to the utilization of an invention is deemed
    commercial and financial information which is not subject to
    the Freedom of Information Act, and shortens the period for the
    delay in obtaining an exclusive or partially exclusive license
    which results from the requirements of public notice from 30 to
    15 days.
        In addition, the amendment contains language pertaining to
    the review of cooperative research and development agreements
    as suggested by the gentlewoman from California, Ms. Tauscher.
    And I commend her and thank her for her very constructive work
    in this area. The amendment is bi-partisan and is supported by
    the Minority and I yield back the balance of my time.
        Is there any further discussion on the amendment?
        Ms. Tauscher. Mr. Chairman?
        Chairman Sensenbrenner. The gentlewoman from California is
    recognized for 5 minutes.
        Ms. Tauscher. Thank you Mr. Chairman. I want to express my
    appreciation to you Mr. Chairman, as well as Ranking Member
    Brown and Subcommittee Chairwoman Morella, for your assistance
    with an amendment that I had prepared for this legislation.
        The amendment, which you have graciously incorporated into
    your substitute to H.R. 2544, would require the White House
    Office on Science and Technology Policy to review the policies
    and procedures used by federal agencies to gather and consider
    the views of other agencies on joint work statements, and
    cooperative research and development agreements. This amendment
    implies only to major CRADAs that involve critical national
    security technologies or may have a significant impact on
    domestic or international competitiveness.
        After completing its review, OSTP is directed to establish,
    if necessary, guidelines for federal agencies to use in
    assessing CRADAs. Any new guidelines should be designed to make
    use of current procedures and minimized any delay in the
    approval or disapproval of joint work statements and CRADAs.
    The intent of this amendment, Mr. Chairman, is to insure that
    federal agencies work cooperatively to provide necessary review
    of CRADA applications in a timely manner. In no way are we
    encouraging OSTP to establish additional burdensome procedures
    for agencies or National laboratories. On the contrary, a
    coordinated review process should insure that National security
    and domestic competitiveness issues are protected while
    providing expedited consideration of CRADA applications.
        To further clarify the intent of this amendment Mr.
    Chairman, I would appreciate your assistance in developing
    report language to accompany H.R. 2544 that makes clear that we
    expect review of only the most significant CRADAs. And that
    clearly defines the term ``Critical National Security
    Technologies'' and ``Domestic and International
    Competitiveness.''
        I understand that work is already underway at some agencies
    to examine the interagency process. I would expect this OSTP
    review to make full use and consideration of any ongoing agency
    efforts to improve the CRADA review process. It is not clear to
    me, Mr. Chairman, that any changes are necessary in procedures
    used by federal agencies to review CRADAs. What is clear,
    however, is that an OSTP-led review will provide greater
    certainty to those in government as well as industry that the
    federal agencies can adequately review CRADAs in a timely and
    effective manner.
        Again I appreciate your support for this amendment and I
    congratulate you on a fine piece of legislation. And I yield
    back the balance of my time.
        Chairman Sensenbrenner. Before you yield back, let me say
    that we will work with you in developing the proper report
    language to implement what you just advocated.
        Ms. Tauscher. Thank you, Mr. Chairman.
        Chairman Sensenbrenner. Is there further debate on the
    amendment?
        Mr. Rohrabacher. Mr. Chairman, I have a few questions about
    the basic bill, and whether or not I should bring it up now
    with the amendment or should I wait until the amendment passes?
        Chairman Sensenbrenner. Why don't we get the amendment
    adopted first?
        Mr. Rohrabacher. All right.
        Chairman Sensenbrenner. The question is on the adoption of
    the amendment.
        All those in favor will signify by saying aye.
        Opposed, no.
        The ayes appear to have it. The ayes have it. And the
    amendment is agreed to.
        The gentleman from California is recognized for 5 minutes
    to strike the last word.
        Mr. Rohrabacher. Okay. I just would--not being in the
    Subcommittee that dealt with this piece of legislation--I would
    like to know--maybe I could ask Mrs. Morella--is the intent of
    this bill to make it easier to commercialize patents that are
    in conflict?
        Mrs. Morella. It is to make it easier to recognize patents
    and to expedite even further the transfer of technology from
    our federal laboratories to the private sector. And what it
    gives--it gives two important new tools to effectively
    commercialize this on-the-shelf federally-owned technologies,
    to license them either as stand-alone inventions or by
    including them as part of a CRADA.
        So therefore, our companies are going to find them far more
    attractive and it's going to expedite the partnership. That was
    the intent of it.
        Mr. Rohrabacher. Okay. I understand that this bill would
    make it easier to cooperate, and thus--for example, in dealing
    with the anti-trust laws and other regulatory complications to
    the utilization of new technology and technology that usually
    going through the patent system. But it is not the intent
    then--it is not your intent and the intent of the authors of
    this legislation, to make it easier to commercialize patents
    that are in conflict--that they're in a conflict situation? In
    terms of ownership.
        Mrs. Morella. These would be patents in which the United
    States is the title holder. That I think takes care of your
    problem.
        Mr. Rohrabacher. Okay. That takes care of that problem.
    Thank you very much.
        Chairman Sensenbrenner. Are there further amendments to the
    bill?
        [No response.]
        If not, the Chair will recognize the gentleman from
    California or his designee to make a motion to report the bill.
        Mr. Brown of California. Mr. Chairman I move that the
    Committee report the bill and that the Committee direct the
    Chairman to take all necessary steps to bring it to the Floor
    as quickly as possible.
        Chairman Sensenbrenner. The question is on the motion. The
    Chair notes the presence of a reporting quorum.
        All those in favor of reporting the bill favorably will
    signify by saying aye.
        Opposed, no.
        The ayes have it. And the bill is favorably reported.
        Without objection, the bill will be reported in the form of
    a single Amendment in the Nature of a Substitute reflecting
    amendments adopted this morning by the Committee. Without
    objection, members will be given the appropriate number of days
    in which to file additional, Minority or dissenting views. And
    without objection and pursuant to House Rule 20, the Chair will
    authorized to make whatever motions will be necessary to send
    the bill to conference.
        Hearing no objection to any of these requests, so ordered.