[Senate Report 105-358]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 668
105th Congress                                                   Report
                                SENATE

 2d Session                                                     105-358
_______________________________________________________________________


 
           TECHNOLOGY TRANSFER COMMERCIALIZATION ACT OF 1998

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 2120





               September 30, 1998.--Ordered to be printed


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       one hundred fifth congress

                             second session

                     JOHN McCAIN, Arizona, Chairman

TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             WENDELL H. FORD, Kentucky
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas          Virginia
OLYMPIA SNOWE, Maine                 JOHN F. KERRY, Massachusetts
JOHN ASHCROFT, Missouri              JOHN B. BREAUX, Louisiana
BILL FRIST, Tennessee                RICHARD H. BRYAN, Nevada
SPENCER ABRAHAM, Michigan            BYRON L. DORGAN, North Dakota
SAM BROWNBACK, Kansas                RON WYDEN, Oregon

                       John Raidt, Staff Director

                       Mark Buse, Policy Director

                  Martha P. Allbright, General Counsel

     Ivan A. Schlager, Democratic Chief Counsel and Staff Director

             James S.W. Drewry, Democratic General Counsel

                                     

                                                       Calendar No. 668
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-358
_______________________________________________________________________


           TECHNOLOGY TRANSFER COMMERCIALIZATION ACT OF 1998

                                _______
                                

               September 30, 1998.--Ordered to be printed

_______________________________________________________________________


       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 2120]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 2120), ``A Bill 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.

                          Purpose of the Bill

  S. 2120, as reported, would improve the ability of the 
Federal agencies and laboratories to transfer technologies to 
the private sector for commercialization purposes.

                          Background and Needs

  Technology transfer is the generic term used to describe 
procedures for private sector companies to get the information 
and intellectual property needed to transform federally owned 
inventions and technologies into commercial products and 
processes. The Federal involvement in technology transfer 
arises from an interest in promoting the economic growth that 
is vital to the nation's welfare and security. It is through 
further development, refinement and marketing by private 
industry that results of research become diffused throughout 
the economy and generate growth.
  Federal laboratories employ one-sixth of the nation's 
scientists and have one-fifth of the country's laboratory and 
equipment capabilities. Consequently, they are considered one 
of the nation's most important research and development 
resources. Beginning in 1980 with the Stevenson-Wydler 
Technology Innovation Act, Congress has grappled with crafting 
an effective policy to transfer technologies discovered in 
federal laboratories to the private sector for 
commercialization.
  The Stevenson-Wydler Act makes clear that Congress expects 
cooperation on research among universities, government 
agencies, and companies and sets up a variety of programs to 
encourage that cooperation. In 1986, a number of amendments 
were made to the Stevenson-Wydler Act including the 
establishment of the cooperative research and development 
agreement (CRADA) as a means for Federal laboratories to do 
cooperative research with others. The CRADA has now become the 
most significant legal mechanism for cooperation with Federal 
laboratories.
  Another key statute with respect to the transfer and 
commercialization of new technologies is the University and 
Small Business Patent Procedures Act, commonly known as the 
Bayh-Dole Act. The Bayh-Dole Act is an attempt to establish a 
uniform policy for the patenting and ownership of federally 
funded inventions. The original 1980 law allowed universities, 
non-profit organizations, and small businesses to obtain title 
to inventions arising from federally funded research that they 
carried out. A 1982 Executive Order extended that authority to 
large businesses to the extent permitted by law, and the 1984 
amendments extended it to entities that run government-owned 
and contractor-operated laboratories. The Bayh-Dole Act has not 
been amended since 1984.
  While the Stevenson-Wydler Act and the Bayh-Dole Act have 
encouraged commercialization through CRADAs and licensing 
agreements, the approval process for such agreements can be 
cumbersome. Delays and uncertainty are characteristic of the 
process and increase transaction costs. In addition, much has 
changed since the 1984 changes to the Bayh-Dole Act and since 
the creation of CRADAs in 1986. These technology transfer 
programs would benefit from the streamlining and improvements 
in the process called for in S. 2120.
  The reported bill incorporates ideas from Federal agencies 
which conduct significant research programs and makes further 
adjustments to existing law to compensate for advances in 
technology and changed circumstances. For instance, public 
notice requirements are encouraged to take advantage of current 
means of communication like electronic mail, and the deadlines 
for such notices would be shortened to reflect the more rapid 
pace at which business occurs today. The bill also makes 
adjustments to recognize ways in which CRADAs are now being 
used which were not contemplated in 1986. In 1986, the CRADA 
was designed as a way to make laboratories more accessible to 
small businesses and there were few restrictions on CRADA 
approval. However, in recent years some CRADAs have involved 
cutting edge technologies for entire industries and interagency 
concerns such as international competitiveness, national 
security, and domestic competitiveness have been raised.

                      Summary of Major Provisions

  As reported, S. 2120, the Technology Transfer 
Commercialization Act of 1998 would improve the ability of 
Federal agencies to license federally owned inventions.
  Sections 2 and 6 would amend the Stevenson-Wydler Act: (1) to 
allow for the licensing of a federally-owned invention that is 
made prior to the signing of a CRADA and is directly related to 
the scope of work under the agreement; and (2) to make changes 
to provisions relating to distribution of royalties received by 
Federal agencies.
  Sections 3 and 5 would make several amendments to the Bayh-
Dole Act. These amendments would: (1) clarify Federal authority 
with respect to a small business or nonprofit organization to 
permit the consolidation of intellectual property rights; (2) 
require 30 days' notice to be given prior to granting an 
exclusive or partially exclusive license; (3) require license 
applicants to submit a basic business plan with development or 
commercialization milestones, and provide for consistent small 
business exemption criteria with respect to non-exclusive 
licenses; (4) exempt the applicant's proprietary detailed plan 
for the development (or marketing) of the invention from 
disclosure under the Freedom of Information Act; and (5) 
clarify conditions under which the government may terminate a 
license for a federally-owned invention.
  Section 4 would require the Office of Science and Technology 
Policy (OSTP) to review agency procedures for the approval or 
disapproval of CRADAs for national security or domestic/
international competitiveness reasons. Within one year of 
enactment, OSTP would be required to establish and distribute 
to the agencies written criteria and procedures for interagency 
reviews of CRADAs.

                          Legislative History

  S. 2120, the Technology Transfer Commercialization Act of 
1998, was introduced by Senator Rockefeller on May 22, 1998. 
The bill is cosponsored by Senator Frist. On April 28, 1998 the 
Subcommittee on Science, Technology and Space of the Commerce 
Committee held a hearing on federal research and development 
funding, including technology transfer, at which time testimony 
was heard from Senator Gramm; Senator Lieberman; Senator 
Domenici; Senator Bingaman; Dr. Kerri-Ann Jones, Acting 
Director, OSTP, the White House; Dr. Albert Teich, Director of 
Science and Policy Programs, American Association for the 
Advancement of Science; Dr. Judith Rodin, President, University 
of Pennsylvania; and Mr. Dan Peterson, President, DAP and 
Associates and former Lockheed Martin Corporation executive.
  On July 29, 1998 the Committee met in open executive session 
and, by a voice vote, ordered the bill to be reported with an 
amendment.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 17, 1998.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2120, 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.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

S. 2120--Technology Transfer Commercialization Act of 1998

    S. 2120 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 two 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 S. 2120 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.
    S. 2120 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would have no impact on the budgets of state, local, or tribal 
governments.
    On May 21, 1998, CBO transmitted a cost estimate for H.R. 
2544, the Technology Transfer Commercialization Act of 1998, as 
ordered reported by the House Committee on Science on May 13, 
1998. The provisions of that bill are similar to those of S. 
2120, and the estimated costs are identical.
    The CBO staff contact for this estimate is Kathleen Gramp. 
This estimate was approved by Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:
  Because S. 2120 does not create any new programs, the 
legislation will have no additional regulatory impact, and will 
result in no additional reporting requirements. The legislation 
will have no further effect on the number or types of 
individuals and businesses regulated, the economic impact of 
such regulation, the personal privacy of affected individuals, 
or the paperwork required from such individuals and businesses.

                       number of persons covered

  The Committee believes that the bill will not subject any 
individuals or businesses affected by the bill to any 
additional regulation.

                            economic impact

  This legislation will not have an adverse impact on the 
Nation and should increase the rate of transfer of technologies 
from Federal agencies and laboratories, thereby generating new 
business opportunities and revenues.

                                privacy

  This legislation will not have an adverse impact on the 
privacy of individuals.

                               paperwork

  This legislation will not increase the paperwork requirements 
for private individuals or businesses. Consistent with existing 
law, it would require businesses to submit a basic business 
plan as part of their application for a license.

                      Section-by-Section Analysis

Section 1. Short title

  This section permits the bill to be cited as the ``Technology 
Transfer Commercialization Act of 1998.''

Section 2. Cooperative Research and Development Agreements

  This section would amend section 12 of the Stevenson-Wydler 
Act to allow the licensing of a federally-owned invention made 
before a CRADA is signed. The provision applies only when the 
invention is directly related to the scope of work under the 
CRADA.

Section 3. Licensing federally owned inventions

  Subsection (a) of this section of the reported bill would 
amend and replace existing section 209 of the Bayh-Dole Act, 
which deals with licensing federally owned inventions.
  Subsection (a) of the revised section 209 would allow a 
Federal agency to grant an exclusive or partially exclusive 
license on a federally-owned invention only if:
          (1) granting the license is a reasonable and 
        necessary incentive, as determined by the agency's 
        head, to get investment capital and expenditures needed 
        to bring the invention to practical application, or to 
        otherwise promote the invention's public use;
          (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 a practical application or otherwise 
        promote the invention's public use, and that the 
        proposed scope of exclusivity is not greater than is 
        reasonably necessary, as defined by the agency's head, 
        to provide the incentive for bringing the invention to 
        practical utilization, as proposed by the applicant, or 
        to otherwise promote public utilization;
          (3) the applicant makes a commitment to achieve 
        practical use of the invention within a reasonable 
        time;
          (4) granting the license will not tend to 
        substantially reduce 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 U.S. industry in foreign commerce 
        will be enhanced.
  Amended section 209(b) of the Bayh-Dole Act would require 
that Federal agencies normally grant licenses to use or to sell 
any federally-owned invention in the United States only to 
those applicants who agree that any products embodying the 
invention or produced through the use of the invention will be 
manufactured substantially in the United States.
  Amended section 209(c) of the Bayh-Dole Act would give 
preference for the granting of any exclusive or partially 
exclusive license to small businesses having greater or equal 
likelihood as other applicants to bring the invention to 
practical application within a reasonable time. The meaning of 
the term ``reasonable time'' should be determined by the 
agency's head through a comparison of similar efforts.
  Amended section 209(d) of the Bayh-Dole Act would require any 
license granted under section 207 of the Bayh-Dole Act to 
contain such terms and conditions as the granting agency 
considers appropriate. These terms and conditions include 
provisions that:
          (1) retain a nontransferable, 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 U.S. government;
          (2) require periodic reporting, by the licensee, on 
        the use of the invention, but only to the extent 
        necessary to enable the Federal agency to determine 
        whether the terms of the license are being complied 
        with;
          (3) empower the Federal agency to terminate the 
        license in whole or in part if the agency determines 
        that:
                  (A) the licensee is not working 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 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 after the date of issue 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.
  Amended section 209(e) of the Bayh-Dole Act would require 
that no exclusive or partially exclusive license be issued 
unless a public notice of intent to grant such a license is 
published 30 days in advance. The Federal agency issuing the 
license would be required to consider all comments received in 
response to that public notice.
  Amended section 209(f) of the Bayh-Dole Act would require all 
persons requesting a license of a federally-owned invention to 
submit a basic business plan with development or 
commercialization milestones. Each Federal agency, in 
consultation with the Small Business Administration, would be 
required to develop consistent standards for exempting small 
businesses from these requirements for non-exclusive licenses.
  Amended section 209(g) of the Bayh-Dole Act would require 
that an application for a license include, as an independent 
subdocument, a detailed description of the applicant's plan for 
development or marketing (or both) of the invention. This 
subdocument would be exempt from disclosure under section 552 
of title 5, United States Code. The subdocument would be 
required to state the following:
          (1) the time, nature, and amount of anticipated 
        investment of capital and other resources which the 
        applicant believes will be required to bring the 
        invention to practical application;
          (2) the applicant's capability and intention to 
        fulfill the plan, including information regarding 
        manufacturing, marketing, financial, and technical 
        resources;
          (3) the fields of use for which the applicant intends 
        to practice the invention; and
          (4) the geographic areas in which the applicant 
        intends to manufacture any product embodying the 
        invention, where the applicant intends to use or sell 
        the invention, or both.

Section 4. Review of Cooperative Research and Development Agreement 
        procedures

  This section of the reported bill requires a review of CRADA 
procedures. Subsection (a) would require the Director of the 
OSTP, in consultation with the Office of Management and Budget, 
relevant Federal agencies, national laboratories, and any other 
person the Director considers appropriate, to review the 
procedures used by Federal agencies to gather and consider the 
views of other agencies before final approval or disapproval 
of:
          (1) a joint work statement under section 12(c)(5) (C) 
        or (D) of the Stevenson-Wydler Act of 1980; or
          (2) in the case of a laboratory described in section 
        12(d)(2)(A) of the Stevenson-Wydler Act of 1980, a 
        CRADA under section 12, that involves national 
        security, or relates to a project which may have a 
        significant impact on domestic or international 
        competitiveness.
  Subsection (b) requires the Director of OSTP, in consultation 
with relevant Federal agencies and laboratories and within one 
year after enactment of the bill, to evaluate the adequacy of 
existing procedures and methods for interagency coordination 
and awareness, and to establish and distribute to appropriate 
Federal agencies criteria and procedures for determining when 
interagencycoordination and review procedures are necessary. To 
the extent practical, the procedures established under subsection (b) 
would be required to use or modify existing procedures, to minimize 
burdens on Federal agencies, and to minimize delay in the approval or 
disapproval of the joint work statement or CRADA under interagency 
review.

Section 5. Technical amendments to Bayh-Dole Act

  This section of the reported bill would amend the Bayh-Dole 
Act to allow the government to consolidate intellectual 
property. Section 202(e) of the Bayh-Dole Act would be amended 
to clarify that the Federal agency employing a coinventor of 
any invention made under a funding agreement with a non-profit 
organization or small business firm may, for purposes of 
consolidating rights in the invention:
          (1) license or assign any rights it may have under 
        the funding agreement to the non-profit organization or 
        small business firm; or
          (2) acquire any rights in the invention from the non-
        profit organization or small business firm, but only if 
        the non-profit organization or small business firm 
        voluntarily enters into the transaction.
  This section of the reported bill would also amend section 
207(a) of the Bayh-Dole Act to allow Federal agencies to grant 
a license for ``federally-owned inventions'' instead of 
``federally-owned patent applications, patents, or other forms 
of protection obtained''. Section 207(a) would be amended to 
clarify that Federal agencies may undertake all 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, but only to the extent the party from 
whom rights are being acquired voluntarily enters into the 
transaction.

Section 6. Technical amendments to the Stevenson-Wydler Technology 
        Innovation Act of 1980

  This section of the reported bill would make two technical 
amendments to section 14 of the Stevenson-Wydler Act. First, 
section 14 of the Act would be amended to allow the head of an 
agency or laboratory to pay royalties or other payments to the 
inventors or coinventors if the inventor's or coinventor's 
rights are assigned to the United States. Second, section 14 
would be amended to establish a two-year period for using or 
obligating any royalties or other payments transferred to a 
laboratory.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, 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 material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                      TITLE 15--COMMERCE AND TRADE

                   CHAPTER 63--TECHNOLOGY INNOVATION

Sec. 3710a. Cooperative research and development agreements

  (a) General Authority.--Each Federal agency may permit the 
director of any of its Government-operated Federal 
laboratories, and, to the extent provided in an agency-approved 
joint work statement, the director of any of its Government-
owned, contractor-operated laboratories--
          (1) to enter into cooperative research and 
        development agreements on behalf of such agency 
        (subject to subsection (c) of this section) with other 
        Federal agencies; units of State or local government; 
        industrial organizations (including corporations, 
        partnerships, and limited partnerships, and industrial 
        development organizations); public and private 
        foundations; nonprofit organizations (including 
        universities); or other persons (including licensees of 
        inventions owned by the Federal agency); and
          (2) to negotiate licensing agreements under section 
        207 of title 35, United States Code, or under other 
        authorities (in the case of a Government-owned, 
        contractor-operated laboratory, subject to subsection 
        (c) of this section) for inventions made or other 
        intellectual property developed at the laboratory and 
        other inventions or other intellectual property that 
        may be voluntarily assigned to the Government.
  (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 signing of the agreement, 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) A nonexclusive, nontransferable, 
                irrevocable, paid-up license from the 
                collaborating party to the laboratory to 
                practice the invention or have the invention 
                practiced throughout the world by or on behalf 
                of the Government. In the exercise of such 
                license, the Government shall not publicly 
                disclose trade secrets or commercial or 
                financial information that is privileged or 
                confidential within the meaning of section 
                552(b)(4) of title 5, United States Code, or 
                which would be considered as such if it had 
                been obtained from a non-Federal party.
                  (B) If a laboratory assigns title or grants 
                an exclusive license to such an invention, the 
                Government shall retain the right--
                          (i) to require the collaborating 
                        party to grant to a responsible 
                        applicant a nonexclusive, partially 
                        exclusive, or exclusive license to use 
                        the invention in the applicant's 
                        licensed field of use, on terms that 
                        are reasonable under the circumstances; 
                        or
                          (ii) if the collaborating party fails 
                        to grant such a license, to grant the 
                        license itself.
                  (C) The Government may exercise its right 
                retained under subparagraph (B) only in 
                exceptional circumstances and only if the 
                Government determines that--
                          (i) the action is necessary to meet 
                        health or safety needs that are not 
                        reasonably satisfied by the 
                        collaborating party;
                          (ii) the action is necessary to meet 
                        requirements for public use specified 
                        by Federal regulations, and such 
                        requirements are not reasonably 
                        satisfied by the collaborating party; 
                        or
                          (iii) the collaborating party has 
                        failed to comply with an agreement 
                        containing provisions described in 
                        subsection (c)(4)(B).
                This determination is subject to administrative 
                appeal and judicial review under section 203(2) 
                of title 35, United States Code.
          (2) Under agreements entered into pursuant to 
        subsection (a)(1), the laboratory shall ensure that a 
        collaborating party may retain title to any invention 
        made solely by its employee in exchange for normally 
        granting the Government a nonexclusive, 
        nontransferable, irrevocable, paid-up license to 
        practice the invention or have the invention practiced 
        throughout the world by or on behalf of the Government 
        for research or other Government purposes.
          (3) Under an agreement entered into pursuant to 
        subsection (a)(1), a laboratory may--
                  (A) accept, retain, and use funds, personnel, 
                services, and property from a collaborating 
                party and provide personnel, services, and 
                property to a collaborating party;
                  (B) use funds received from a collaborating 
                party in accordance with subparagraph (A) to 
                hire personnel to carry out the agreement who 
                will not be subject to full-time-equivalent 
                restrictions of the agency;
                  (C) to the extent consistent with any 
                applicable agency requirements or standards of 
                conduct, permit an employee or former employee 
                of the laboratory to participate in an effort 
                to commercialize an invention made by the 
                employee or former employee while in the 
                employment or service of the Government; and
                  (D) waive, subject to reservation by the 
                Government of a nonexclusive, irrevocable, 
                paid-up license to practice the invention or 
                have the invention practiced throughout 
theworld by or on behalf of the Government, in advance, in whole or in 
part, any right of ownership which the Federal Government may have to 
any subject invention made under the agreement by a collaborating party 
or employee of a collaborating party.
          (4) A collaborating party in an exclusive license in 
        any invention made under an agreement entered into 
        pursuant to subsection (a)(1) shall have the right of 
        enforcement under chapter 29 of title 35, United States 
        Code.
          (5) A Government-owned, contractor-operated 
        laboratory that enters into a cooperative research and 
        development agreement pursuant to subsection (a)(1) may 
        use or obligate royalties or other income accruing to 
        the laboratory under such agreement with respect to any 
        invention only--
                  (A) for payments to inventors;
                  (B) for purposes described in clauses (i), 
                (ii), (iii), and (iv) of section 14(a)(1)(B); 
                and
                  (C) for scientific research and development 
                consistent with the research and development 
                missions and objectives of the laboratory.
  (c) Contract Considerations.--
          (1) A Federal agency may issue regulations on 
        suitable procedures for implementing the provisions of 
        this section; however, implementation of this section 
        shall not be delayed until issuance of such 
        regulations.
          (2) The agency in permitting a Federal laboratory to 
        enter into agreements under this section shall be 
        guided by the purposes of this Act.
          (3)(A) Any agency using the authority given it under 
        subsection (a) shall review standards of conduct for 
        its employees for resolving potential conflicts of 
        interest to make sure they adequately establish 
        guidelines for situations likely to arise through the 
        use of this authority, including but not limited to 
        cases where present or former employees or their 
        partners negotiate licenses or assignments of titles to 
        inventions or negotiate cooperative research and 
        development agreements with Federal agencies (including 
        the agency with which the employee involved is or was 
        formerly employed).
          (B) If, in implementing subparagraph (A), an agency 
        is unable to resolve potential conflicts of interest 
        within its current statutory framework, it shall 
        propose necessary statutory changes to be forwarded to 
        its authorizing committees in Congress.
          (4) The laboratory director in deciding what 
        cooperative research and development agreements to 
        enter into shall--
                  (A) give special consideration to small 
                business firms, and consortia involving small 
                business firms; and
                  (B) give preference to business units located 
                in the United States which agree that products 
                embodying inventions made under the cooperative 
                research and development agreement or produced 
                through the use of such inventions will be 
                manufactured substantially in the United States 
                and, in the case of any industrial organization 
                or other person subject to the control of a 
                foreign company or government, as appropriate, 
                take into consideration whether or not such 
                foreign government permits United States 
                agencies, organizations, or other persons to 
                enter into cooperative research and development 
                agreements and licensing agreements.
          (5)(A) If the head of the agency or his designee 
        desires an opportunity to disapprove or require the 
        modification of any such agreement presented by the 
        director of a Government-operated laboratory, the 
        agreement shall provide a 30-day period within which 
        such action must be taken beginning on the date the 
        agreement is presented to him or her by the head of the 
        laboratory concerned.
          (B) In any case in which the head of an agency or his 
        designee disapproves or requires the modification of an 
        agreement presented by the director of a Government-
        operated laboratory under this section, the head of the 
        agency or such designee shall transmit a written 
        explanation of such disapproval or modification to the 
        head of the laboratory concerned.
          (C)(i) Except as provided in subparagraph (D), any 
        agency which has contracted with a non-Federal entity 
        to operate a laboratory shall review and approve, 
        request specific modifications to, or disapprove a 
        joint work statement that is submitted by the director 
        of such laboratory within 90 days after such 
        submission. In any case where an agency has requested 
        specific modifications to a joint work statement, the 
        agency shall approve or disapprove any resubmission of 
        such joint work statement within 30 days after such 
        resubmission, or 90 days after the original submission, 
        whichever occurs later. No agreement may be entered 
        into by a Government-owned, contractor-operated 
        laboratory under this section before both approval of 
        the agreement under clause (iv) and approval under this 
        clause of a joint work statement.
          (ii) In any case in which an agency which has 
        contracted with a non-Federal entity to operate a 
        laboratory disapproves or requests the modification of 
        a joint work statement submitted under this section, 
        the agency shall promptly transmit a written 
        explanation of such disapproval or modification to the 
        director of the laboratory concerned.
          (iii) Any agency which has contracted with a non-
        Federal entity to operate a laboratory or laboratories 
        shall develop and provide to such laboratory or 
        laboratories one or more model cooperative research and 
        development agreements, for the purposes of 
        standardizing practices and procedures, resolving 
        common legal issues, and enabling review of cooperative 
        research and development agreements to be carried out 
        in a routine and prompt manner.
          (iv) An agency which has contracted with a non-
        Federal entity to operate a laboratory shall review 
        each agreement under this section. Within 30 days after 
        the presentation, by the director of the laboratory, of 
        such agreement, the agency shall, on the basis of such 
        review, approve or request specific modification to 
        such agreement. Such agreement shall not take effect 
        before approval under this clause.
          (v) If an agency fails to complete a review under 
        clause (iv) within the 30-day period specified therein, 
        the agency shall submit to the Congress, within 10 days 
        after the end of that 30-day period, a report on the 
        reasons for such failure. The agency shall, at the end 
        of each successive 30-day period thereafter during 
        which such failure continues, submit to the Congress 
        another report on the reasons for the continuing 
        failure. Nothing in this clause relieves the agency of 
        the requirement to complete a review under clause (iv).
          (vi) In any case in which an agency which has 
        contracted with a non-Federal entity to operate a 
        laboratory requests the modification of an agreement 
        presented under this section, the agency shall promptly 
        transmit a written explanation of such modification to 
        the director of the laboratory concerned.
          (D)(i) Any non-Federal entity that operates a 
        laboratory pursuant to a contract with a Federal agency 
        shall submit to the agency any cooperative research and 
        development agreement that the entity proposes to enter 
        into with a small business firm and the joint work 
        statement required with respect to that agreement.
          (ii) A Federal agency that receives a proposed 
        agreement and joint work statement under clause (i) 
        shall review and approve, request specific 
        modifications to, or disapprove the proposed agreement 
        and joint work statement within 30 days after such 
        submission. No agreement may be entered into by a 
        Government-owned, contractor-operated laboratory under 
        this section before both approval of the agreement and 
        approval of a joint work statement under this clause.
          (iii) In any case in which an agency which has 
        contracted with an entity referred to in clause (i) 
        disapproves or requests the modification of a 
        cooperative research and development agreement or joint 
        work statement submitted under that clause, the agency 
        shall transmit a written explanation of such 
        disapproval or modification to the head of the 
        laboratory concerned.
          (6) Each agency shall maintain a record of all 
        agreements entered into under this section.
          (7)(A) No trade secrets or commercial or financial 
        information that is privileged or confidential, under 
        the meaning of section 552(b)(4) of title 5, United 
        States Code, which is obtained in the conduct of 
        research or as a result of activities under this Act 
        from a non-Federal party participating in a cooperative 
        research and development agreement shall be disclosed.
          (B) The director, or in the case of a contractor-
        operated laboratory, the agency, for a period of up to 
        5 years after development of information that results 
        from research and development activities conducted 
        under this Act and that would be a trade secret or 
        commercial or financial information that is privileged 
        or confidential if the information had been obtained 
        from a non-Federal party participating in a cooperative 
        research and development agreement, may provide 
        appropriate protections against the dissemination of 
        such information, including exemption from subchapter 
        II of chapter 5 of title 5, United States Code.
  (d) Definitions.--As used in this section--
          (1) the term ``cooperative research and development 
        agreement'' means any agreement between one or more 
        Federal laboratories and one or more non-Federal 
        parties under which the Government, through its 
        laboratories, provides personnel, services, facilities, 
        equipment, intellectual property, or other resources 
        with or without reimbursement (but not funds to non-
        Federal parties) and the non-Federal parties provide 
        funds, personnel, services, facilities, equipment, 
        intellectual property, or other resources toward the 
        conduct of specified research or development efforts 
        which are consistent with the missions of the 
        laboratory; except that such term does not include a 
        procurement contract or cooperative agreement as those 
        terms are used in sections 6303, 6304, and 6305 of 
        title 31, United States Code;
          (2) the term ``laboratory'' means--
                  (A) a facility or group of facilities owned, 
                leased, or otherwise used by a Federal agency, 
                a substantial purpose of which is the 
                performance of research, development, or 
                engineering by employees of the Federal 
                Government;
                  (B) a group of Government-owned, contractor-
                operated facilities (including a weapon 
                production facility of the Department of 
                Energy) under a common contract, when a 
                substantial purpose of the contract is the 
                performance of research and development, or the 
                production, maintenance, testing, or 
                dismantlement of a nuclear weapon or its 
                components, for the Federal Government; and
                  (C) a Government-owned, contractor-operated 
                facility (including a weapon production 
                facility of the Department of Energy) that is 
                not under a common contract described in 
                subparagraph (B), and the primary purpose of 
                which is the performance of research and 
                development, or the production, maintenance, 
                testing, or dismantlement of a nuclear weapon 
                or its components, for the Federal Government,
        but such term does not include any facility covered by 
        Executive Order No. 12344, dated February 1, 1982, 
        pertaining to the naval nuclear propulsion program;
          (3) the term ``joint work statement'' means a 
        proposal prepared for a Federal agency by the director 
        of a Government-owned, contractor-operated laboratory 
        describing the purpose and scope of a proposed 
        cooperative research and development agreement, and 
        assigning rights and responsibilities among the agency, 
        the laboratory, and any other party or parties to the 
        proposed agreement; and
          (4) the term ``weapon production facility of the 
        Department of Energy'' means a facility under the 
        control or jurisdiction of the Secretary of Energy that 
        is operated for national securitypurposes and is 
engaged in the production, maintenance, testing, or dismantlement of a 
nuclear weapon or its components.
  (e) Determination of Laboratory Missions.--For purposes of 
this section, an agency shall make separate determinations of 
the mission or missions of each of its laboratories.
  (f) Relationship to Other Laws.--Nothing in this section is 
intended to limit or diminish existing authorities of any 
agency.
  (g) Principles.--In implementing this section, each agency 
which has contracted with a non-Federal entity to operate a 
laboratory shall be guided by the following principles:
          (1) The implementation shall advance program missions 
        at the laboratory, including any national security 
        mission.
          (2) Classified information and unclassified sensitive 
        information protected by law, regulation, or Executive 
        order shall be appropriately safeguarded.

Sec. 3710c. 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.] coinventors, 
                if the inventor's or coinventor's rights are 
                assigned to the United States.
                  (ii) An agency or laboratory may provide 
                appropriate incentives, from royalties, or 
                other payments, to laboratory employees who are 
                not an inventor of such inventions but who 
                substantially increased the technical value of 
                such inventions.
                  (iii) The agency or laboratory shall retain 
                the royalties and other payments received from 
                an invention until the agency or laboratory 
                makes payments to employees of a laboratory 
                under clause (i) or (ii).
                  (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--] the 2 
                succeeding fiscal years--
                          (i) to reward scientific, 
                        engineering, and technical employees of 
                        the laboratory, including developers of 
                        sensitive or classified technology, 
                        regardless of whether the technology 
                        has commercial applications;
                          (ii) to further scientific exchange 
                        among the laboratories of the agency;
                          (iii) for education and training of 
                        employees consistent with the research 
                        and development missions and objectives 
                        of the agency or laboratory, and for 
                        other activities that increase the 
                        potential for transfer of the 
                        technology of the laboratories of the 
                        agency;
                          (iv) for payment of expenses 
                        incidental to the administration and 
                        licensing of intellectual property by 
                        the agency or laboratory with respect 
                        to inventions made at that laboratory, 
                        including the fees or other costs for 
                        the services of other agencies, 
                        persons, or organizations for 
                        intellectual property management and 
                        licensing services; or
                          (v) for scientific research and 
                        development consistent with the 
                        research and development missions and 
                        objectives of the laboratory.
                  (C) All royalties or other payments retained 
                by the agency or laboratory after payments have 
                been made pursuant to subparagraphs (A) and (B) 
                that is unobligated and unexpended at the end 
                of the second fiscal year succeeding the fiscal 
                year in which the royalties and other payments 
                were received shall be paid into the Treasury.
          (2) If, after payments to inventors under paragraph 
        (1), the royalties or other payments received by an 
        agency in any fiscal year exceed 5 percent of the 
        budget of the Government-operated laboratories of the 
        agency for that year, 75 percent of such excess shall 
        be paid to the Treasury of the United States and the 
        remaining 25 percent may be used or obligated under 
        paragraph (1)(B). Any funds not so used or obligated 
        shall be paid into the Treasury of the United States.
          (3) Any payment made to an employee under this 
        section shall be in addition to the regular pay of the 
        employee and to any other awards made to the employee, 
        and shall not affect the entitlement of the employee to 
        any regular pay, annuity, or award to which he is 
        otherwise entitled or for which he is otherwise 
        eligible or limit the amount thereof. Any payment made 
        to an inventor as such shall continue after the 
        inventor leaves the laboratory or agency. Payments made 
        under this section shall not exceed $150,000 per year 
        to any one person, unless the President approves a 
        larger award (with the excess over $150,000 being 
        treated as a Presidential award under section 4504 of 
        title 5, United States Code).
          (4) A Federal agency receiving royalties or other 
        payments as a result of invention management services 
        performed for another Federal agency or laboratory 
        under section 207 of title 35, United States Code, may 
        retain such royalties or payments to the extent 
        required to offset payments to inventors under clause 
        (i) of paragraph (1)(A), costs and expenses incurred 
        under clause (iv) of paragraph (1)(B), and the cost of 
        foreign patenting and maintenance for any invention of 
        the other agency. All royalties and other payments 
        remaining after offsetting the payments to inventors, 
        costs, and expenses described in the preceding sentence 
        shall be transferred to the agency for which the 
        services were performed, for distribution in accordance 
        with paragraph (1)(B).
  (b) Certain Assignments.--If the invention involved was one 
assigned to the Federal agency--
          (1) by a contractor, grantee, or participant, or an 
        employee of a contractor, grantee, or participant, in 
        an agreement or other arrangement with the agency, or
          (2) by an employee of the agency who was not working 
        in the laboratory at the time the invention was made,
the agency unit that was involved in such assignment shall be 
considered to be a laboratory for purposes of this section.
  (c) Reports.--
          (1) In making their annual budget submissions Federal 
        agencies shall submit, to the appropriate authorization 
        and appropriation committees of both Houses of the 
        Congress, summaries of the amount of royalties or other 
        income received and expenditures made (including 
        inventor awards) under this section.
          (2) The Comptroller General, five years after the 
        date of the enactment of this section, shall review the 
        effectiveness of the various royalty-sharing programs 
        established under this section and report to the 
        appropriate committees of the House of Representatives 
        and the Senate, in a timely manner, his findings, 
        conclusions, and recommendations for improvements in 
        such programs.

                           TITLE 35--PATENTS

       PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS

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

Sec. 202. Disposition of rights

  (a) Each nonprofit organization or small business firm may, 
within a reasonable time after disclosure as required by 
paragraph (c)(1) of this section, elect to retain title to any 
subject invention: Provided, however, That a funding agreement 
may provide otherwise (i) when the contractor is not located in 
the United States or does not have a place of business located 
in the United States or is subject to the control of a foreign 
government, (ii) in exceptional circumstances when it is 
determined by the agency that restriction or elimination of the 
right to retain title to any subject invention will better 
promote the policy and objectives of this chapter, (iii) when 
it is determined by a Government authority which is authorized 
by statute or Executive order to conduct foreign intelligence 
or counter-intelligence activities that the restriction or 
elimination of the right to retain title to any subject 
invention is necessary to protect the security of such 
activities or, (iv) when the funding agreement includes the 
operation of a Government-owned, contractor-operated facility 
of the Department of Energy primarily dedicated to that 
Department's naval nuclear propulsion or weapons related 
programs and all funding agreement limitations under this 
subparagraph on the contractor's right to elect title to a 
subject invention are limited to inventions occurring under the 
above two programs of the Department of Energy. The rights of 
the nonprofit organization or small business firm shall be 
subject to the provisions of paragraph (c) of this section and 
the other provisions of this chapter.
  (b)(1) The rights of the Government under subsection (a) 
shall not be exercised by a Federal agency unless it first 
determines that at least one of the conditions identified in 
clauses (i) through (iv) of subsection (a) exists. Except in 
the case of subsection (a)(iii), the agency shall file with the 
Secretary of Commerce, within thirty days after the award of 
the applicable funding agreement, a copy of such determination. 
In the case of a determination under subsection (a)(ii), the 
statement shall include an analysis justifying the 
determination. In the case of determinations applicable to 
funding agreements with small business firms, copies shall also 
be sent to the Chief Counsel for Advocacy of the Small Business 
Administration. If the Secretary of Commerce believes that any 
individual determination or pattern of determinations is 
contrary to the policies and objectives of this chapter or 
otherwise not in conformance with this chapter, the Secretary 
shall so advise the head of the agency concerned and the 
Administrator of the Office of Federal Procurement Policy, and 
recommend corrective actions.
  (2) Whenever the Administrator of the Office of Federal 
Procurement Policy has determined that one or more Federal 
agencies are utilizing the authority of clause (i) or (ii) of 
subsection (a) of this section in a manner that is contrary to 
the policies and objectives of this chapter, the Administrator 
is authorized to issue regulations describing classes of 
situations in which agencies may not exercise the authorities 
of those clauses.
  (3) At least once every five years, the Comptroller General 
shall transmit a report to the Committees on the Judiciary of 
the Senate and House of Representatives on the manner in which 
this chapter is being implemented by the agencies and on such 
other aspects of Government patent policies and practices with 
respect to federally funded inventions as the Comptroller 
General believes appropriate.
  (4) If the contractor believes that a determination is 
contrary to the policies and objectives of this chapter or 
constitutes an abuse of discretion by the agency, the 
determination shall be subject to the last paragraph of section 
203(2).
  (c) Each funding agreement with a small business firm or 
nonprofit organization shall contain appropriate provisions to 
effectuate the following:
          (1) That the contractor disclose each subject 
        invention to the Federal agency within a reasonable 
        time after it becomes known to contractor personnel 
        responsible for the administration of patent matters, 
        and that the Federal Government may receive title to 
        any subject invention not disclosed to it within such 
        time.
          (2) That the contractor make a written election 
        within two years after disclosure to the Federal agency 
        (or such additional time as may be approved by the 
        Federal agency) whether the contractor will retain 
        title to a subject invention: Provided, That in any 
        case where publication, on sale, or public use, 
hasinitiated the one year statutory period in which valid patent 
protection can still be obtained in the United States, the period for 
election may be shortened by the Federal agency to a date that is not 
more than sixty days prior to the end of the statutory period: And 
provided further, That the Federal Government may receive title to any 
subject invention in which the contractor does not elect to retain 
rights or fails to elect rights within such times.
          (3) That a contractor electing rights in a subject 
        invention agrees to file a patent application prior to 
        any statutory bar date that may occur under this title 
        due to publication, on sale, or public use, and shall 
        thereafter file corresponding patent applications in 
        other countries in which it wishes to retain title 
        within reasonable times, and that the Federal 
        Government may receive title to any subject inventions 
        in the United States or other countries in which the 
        contractor has not filed patent applications on the 
        subject invention within such times.
          (4) With respect to any invention in which the 
        contractor elects rights, the Federal agency shall have 
        a nonexclusive, nontransferrable, irrevocable, paid-up 
        license to practice or have practiced for or on behalf 
        of the United States any subject invention throughout 
        the world: Provided, That the funding agreement may 
        provide for such additional rights; including the right 
        to assign or have assigned foreign patent rights in the 
        subject invention, as are determined by the agency as 
        necessary for meeting the obligations of the United 
        States under any treaty, international agreement, 
        arrangement of cooperation, memorandum of 
        understanding, or similar arrangement, including 
        military agreement relating to weapons development and 
        production.
          (5) The right of the Federal agency to require 
        periodic reporting on the utilization or efforts at 
        obtaining utilization that are being made by the 
        contractor or his licensees or assignees: Provided, 
        That any such information as well as any information on 
        utilization or efforts at obtaining utilization 
        obtained as part of a proceeding under section 203 of 
        this chapter shall be treated by the Federal agency as 
        commercial and financial information obtained from a 
        person and privileged and confidential and not subject 
        to disclosure under section 552 of title 5 of the 
        United States Code.
          (6) An obligation on the part of the contractor, in 
        the event a United States patent application is filed 
        by or on its behalf or by any assignee of the 
        contractor, to include within the specification of such 
        application and any patent issuing thereon, a statement 
        specifying that the invention was made with Government 
        support and that the Government has certain rights in 
        the invention.
          (7) In the case of a nonprofit organization, (A) a 
        prohibition upon the assignment of rights to a subject 
        invention in the United States without the approval of 
        the Federal agency, except where such assignment is 
        made to an organization which has as one of its primary 
        functions the management of inventions (provided that 
        such assignee shall be subject to the same provisions 
        as the contractor); (B) a requirement that the 
        contractor share royalties with the inventor; (C) 
        except with respect to a funding agreement for the 
        operation of a Government-owned-contractor-operated 
        facility, a requirement that the balance of any 
        royalties or income earned by the contractor with 
        respect to subject inventions, after payment of 
        expenses (including payments to inventors) incidental 
        to the administration of subject inventions, be 
        utilized for the support of scientific research or 
        education; (D) a requirement that, except where it 
        proves infeasible after a reasonable inquiry, in the 
        licensing of subject inventions shall be given to small 
        business firms; and (E) with respect to a funding 
        agreement for the operation of a Government-owned-
        contractor-operated facility, requirements (i) that 
        after payment of patenting costs, licensing costs, 
        payments to inventors, and other expenses incidental to 
        the administration of subject inventions, 100 percent 
        of the balance of any royalties or income earned and 
        retained by the contractor during any fiscal year up to 
        an amount equal to 5 percent of the annual budget of 
        the facility, shall be used by the contractor for 
        scientific research, development, and education 
        consistent with the research and development mission 
        and objectives of the facility, including activities 
        that increase the licensing potential of other 
        inventions of the facility; provided that if said 
        balance exceeds 5 percent of the annual budget of the 
        facility, that 75 percent of such excess shall be paid 
        to the Treasury of the United States and the remaining 
        25 percent shall be used for the same purposes as 
        described above in this clause (D); and (ii) that, to 
        the extent it provides the most effective technology 
        transfer, the licensing of subject inventions shall be 
        administered by contractor employees on location at the 
        facility.
          (8) The requirements of sections 203 and 204 of this 
        chapter.
  (d) If a contractor does not elect to retain title to a 
subject invention in cases subject to this section, the Federal 
agency may consider and after consultation with the contractor 
grant requests for retention of rights by the inventor subject 
to the provisions of this Act and regulations promulgated 
hereunder.
  [(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 to the nonprofit organization 
        or small business firm; or
          (2) acquire any rights in the subject invention from 
        the nonprofit organization or small business firm, but 
        only to the extent the party from whom the rights are 
        acquired voluntarily enters into the transaction.
  (f)(1) No funding agreement with a small business firm or 
nonprofit organization shall contain a provision allowing a 
Federal agency to require the licensing to third parties of 
inventions owned by the contractor that are not subject 
inventions unless such provision has been approved by the head 
of the agency and a written justification has been signed by 
the head of the agency. Any such provision shall clearly state 
whether the licensing may be required in connection with the 
practice of a subject invention, a specifically identified work 
object, or both. The head of the agency may not delegate the 
authority to approve provisions or sign justifications required 
by this paragraph.
  (2) A Federal agency shall not require the licensing of third 
parties under any such provision unless the head of the agency 
determines that the use of the invention by others is necessary 
for the practice of a subject invention or for the use of a 
work object of the funding agreement and that such action is 
necessary to achieve the practical application of the subject 
invention or work object. Any such determination shall be on 
the record after an opportunity for an agency hearing. Any 
action commenced for judicial review of such determination 
shall be brought within sixty days after notification of such 
determination.

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

  (a) Each Federal agency is authorized to--
          (1) apply for, obtain, and maintain patents or other 
        forms of protection in the United States and in foreign 
        countries on inventions in which the Federal Government 
        owns a right, title, or interest;
          (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;] 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
          (4) transfer custody and administration, in whole or 
        in part, to another Federal agency, of the right, title 
        or interest in any federally-owned invention.
  (b) For the purpose of assuring the effective management of 
Government-owned inventions, the Secretary of Commerce is 
authorized to--
          (1) assist Federal agency efforts to promote the 
        licensing and utilization of Government-owned 
        inventions;
          (2) assist Federal agencies in seeking protection and 
        maintaining inventions in foreign countries, including 
        the payment of fees and costs connected therewith; and
          (3) consult with and advise Federal agencies as to 
        areas of science and technology research and 
        development with potential for commercial utilization.

[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 any 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 
exclusively 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.--Any licenses granted under section 
207 shall contain such terms and conditions as the granting 
agency considers appropriate. Such terms and conditions--
          (1) shall include provisions--
                  (A) retaining a nontransferable, 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;
                  (B) 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
                  (C) empowering the Federal agency to 
                terminate the license in whole or in part if 
                the agency determines that--
                          (i) 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;
                          (ii) the licensee is in breach of an 
                        agreement described in subsection (b);
                          (iii) 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
                          (iv) 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 intent to grant such a license has been provided at 
least 30 days before the license is granted, and the Federal 
agency has considered all comments received in response to that 
public notice.
  (f) Development 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 or commercialization milestones. Each Federal 
agency, in consultation with the Small Business Administration, 
shall develop consistent standards for exempting small business 
firms from the requirements of this subsection for non-
exclusive licenses.
  (g) Nondisclosure of Certain Information.--An application 
shall include, as an independent subdocument a detailed 
description of the applicant's plan for development or 
marketing (or both) of the invention. The subdocument, which is 
exempt from disclosure under section 552 of title 5, United 
States Code, shall include only a statement--
          (1) of the time, nature, and amount of anticipated 
        investment of capital and other resources which the 
        applicant believes will be required to bring the 
        invention to practical application;
          (2) as to the applicant's capability and intention to 
        fulfill the plan, including information regarding 
        manufacturing, marketing, financial, and technical 
        resources;
          (3) of the fields of use for which the applicant 
        intends to practice the invention; and
          (4) of the geographic areas--
                  (A) in which the applicant intends to 
                manufacture any product embodying the 
                invention;
                  (B) where the applicant intends to use or 
                sell the invention; or
                  (C) both.

                                
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