Technology Transfer: Administration of the Bayh-Dole Act by Research
Universities (Letter Report, 05/07/98, GAO/RCED-98-126).

Pursuant to a legislative requirement, GAO reviewed the administration
of the Bayh-Dole Act in research universities.

GAO noted that: (1) federal agencies' administration of the Bayh-Dole
Act as it applies to research universities is decentralized; (2) while
the Department of Commerce has issued implementing regulations and
provides coordination under limited circumstances, the act actually is
administered by the agencies providing the funds; (3) the agencies'
activities consist largely of ensuring that the universities meet the
reporting requirements and deadlines set out in the act and regulations;
(4) according to Commerce officials, no agency has yet taken back the
title to any inventions because they were not being commercialized; (5)
GAO visited 10 major research universities and found that they had
established formal programs and procedures to implement the act; (6) the
universities had special units to handle the reporting and licensing of
inventions, had established procedures to ensure adherence to the act's
reporting requirements, had set up computerized databases to monitor
activities involving inventions, and were actively pursuing licensing
for their inventions; (7) they also appeared to be pursuing licensing
opportunities wherever possible and sharing royalties with the
inventors; (8) officials within the agencies and universities GAO
visited said the act was having a positive impact and was working as
Congress intended; (9) they believed that the universities and
researchers were receiving greater benefits from their inventions and
were transferring technology better than they did when it retained title
to inventions; (10) although there is no database or study showing the
impact specifically attributable to the act, a fiscal year 1996 report
from a survey conducted by the Association of University Technology
Managers indicates that inventions from all funding sources, including
federal agencies, are increasing in their importance to universities;
and (11) in fiscal year 1996, the number of inventions disclosed by
universities increased by 9.3 percent for the year, and licensing
income--which totalled $365.2 million--increased by 22.1 percent.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-98-126
     TITLE:  Technology Transfer: Administration of the Bayh-Dole Act by 
             Research Universities
      DATE:  05/07/98
   SUBJECT:  Technology transfer
             Research and development
             Colleges/universities
             Patents
             License agreements
             Royalty payments
             Copyrights
             Patent law
             Research program management
             Intellectual property

             
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Cover
================================================================ COVER


Report to Congressional Committees

May 1998

TECHNOLOGY TRANSFER -
ADMINISTRATION OF THE BAYH-DOLE
ACT BY RESEARCH UNIVERSITIES

GAO/RCED-98-126

Transferring Federal Technology

(141045)


Abbreviations
=============================================================== ABBREV

  APL - Applied Physics Laboratory
  AUTM - Association of University Technology Managers
  CIE - Columbia Innovation Enterprise
  CSREES - Cooperative State Research, Education and Extension
     Service
  CU - Columbia University
  DOD - Department of Defense
  DOE - Department of Energy
  FFRDC - Federally Funded Research and Development Centers
  GAO - General Accounting Office
  HHS - Department of Health and Human Services
  JHU - Johns Hopkins University
  MIT - Massachusetts Institute of Technology
  MSU - Michigan State University
  MSUF - Michigan State University Foundation
  NASA - National Aeronautics and Space Administration
  NIH - National Institutes of Health
  NSF - National Science Foundation
  OIP - Office of Intellectual Property
  ONR - Office of Naval Research
  OTL - Office of Technology Licensing
  OTT - Office of Technology Transfer
  OTTL - Office for Technology and Trademark Licensing
  PTO - Patent and Trademark Office
  R&D - Research and Development
  RCT - Research Technology Corporation
  TLO - Technology Licensing Office
  TMO - Technology Management Office
  UC - University of California
  UIR - University-Industry Relation
  UM - University of Michigan
  USDA - United States Department of Agriculture
  UW - University of Washington
  UWM - University of Wisconsin-Madison
  WARF - Wisconsin Alumni Research Foundation
  WRF - Washington Research Foundation

Letter
=============================================================== LETTER


B-275266

May 7, 1998

The Honorable Orrin G.  Hatch
Chairman, Committee on the Judiciary
United States Senate

The Honorable Henry Hyde
Chairman, Committee on the Judiciary
House of Representatives

As you know, the Patent and Trademark Laws Amendments of 1980, as
amended (commonly known as the Bayh-Dole Act), requires us to review
periodically chapter 18 of title 35 of the U.S.  Code, which promotes
the use of federally funded inventions by small businesses and
nonprofit organizations.  The act purposes to do this by allowing (1)
nonprofit organizations such as universities to retain title to and
market the inventions they created using federal research funds and
(2) federal agencies to grant exclusive licenses for federally owned
inventions to provide more incentive to businesses. 

In our last report on this subject in 1991,\1 we focused largely on
the granting, selling, and licensing of government-owned inventions. 
Our current report addresses the manner in which the Bayh-Dole Act is
being administered in research universities, as agreed with staff
from the Senate Committee on the Judiciary and from the Courts and
Intellectual Property Subcommittee of the House Committee on the
Judiciary.  We provide information on (1) the administration of the
Bayh-Dole Act by the eight largest federal agencies that fund
research and development (R&D), (2) the administration of the
Bayh-Dole Act by 10 of the largest U.S.  research universities, and
(3) the impact of the Bayh-Dole Act, largely on the basis of annual
surveys of research universities conducted by the Association of
University Technology Managers (AUTM).\2 (Additional details on our
objectives, scope, and methodology are included in app.  I.)


--------------------
\1 Technology Transfer:  Federal Agencies' Patent Licensing
Activities (GAO/RCED-91-80; Apr.  3, 1991). 

\2 AUTM is a nonprofit organization formed to assist university
technology administrators in the effective transfer of technology to
the public. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Federal agencies' administration of the Bayh-Dole Act as it applies
to research universities is decentralized.  While the Department of
Commerce has issued implementing regulations and provides
coordination under limited circumstances, the act actually is
administered by the agencies providing the funds.  The agencies'
activities consist largely of ensuring that the universities meet the
reporting requirements and deadlines set out in the act and
regulations.  According to Commerce officials, no agency has yet
taken back the title to any inventions because they were not being
commercialized. 

We visited 10 major research universities and found that they had
established formal programs and procedures to implement the act.  The
universities had special units to handle the reporting and licensing
of inventions, had established procedures to ensure adherence to the
act's reporting requirements, had set up computerized databases to
monitor activities involving inventions, and were actively pursuing
licensing for their inventions.  They also appeared to be pursuing
licensing opportunities wherever possible and sharing royalties with
the inventors. 

Officials within the agencies and universities we visited said the
act was having a positive impact and was working as the Congress
intended.  They believed that the universities and researchers were
receiving greater benefits from their inventions and were
transferring technology better than the government did when it
retained title to inventions.  Although there is no database or study
showing the impact specifically attributable to the act, a fiscal
year 1996 report from a survey conducted by the Association of
University Technology Managers indicates that inventions from all
funding sources, including federal agencies, are increasing in their
importance to universities.  In fiscal year 1996, the number of
inventions disclosed by universities increased by 9.3 percent for the
year, and licensing income--which totaled $365.2 million--increased
by 22.1 percent. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Since World War II, the U.S.  government has made significant
contributions to the world's science and technology base, both by
supporting basic scientific research and by pursuing science and
technology missions within federal agencies.  Two major beneficiaries
of this federal spending have been universities and U.S.-based
corporations.  The universities benefited because the government was
willing to underwrite basic research that may not lead to the
creation of new and profitable products or services in the near term. 
The corporations benefited from the products and services they were
able to develop for the government itself as well as from the
"spin-off" process, whereby the results of government-sponsored
research could be used to develop products and services for the
private sector. 

Despite the perceived success of federal efforts to support R&D, by
the late 1970s there was a growing dissatisfaction with federal
policies related to the patenting of the scientific knowledge
resulting from the research.  Many officials, for example, believed
that federal laboratories harbored information that was not being
disseminated to those who could make use of it.  Similarly, there was
a concern that the advances attributable to university-based research
were not being pursued because there was little incentive to seek
practical uses for inventions to which the federal government
retained title.  Those seeking to use government-owned technology
found a maze of rules and regulations set out by the agencies in
question because there was no uniform federal policy on patents for
government-sponsored inventions or on the transfer of technology from
the government to the private sector. 

In 1980, the Congress addressed these concerns by enacting
legislation to bolster the economic impact of federal R&D
investments.  One such law was the Bayh-Dole Act (P.L.  96-517, Dec. 
12, 1980).  The purpose of this act was to reform U.S.  patent policy
related to government-sponsored research.  At the time, fewer than 5
percent of the 28,000 patents being held by federal agencies had been
licensed, compared with 25 percent to 30 percent of the small number
of federal patents for which the government had allowed companies to
retain title to the invention.  In this connection, the Bayh-Dole Act
had two purposes:  (1) to allow universities, not-for-profit
corporations, and small businesses to patent and commercialize their
federally funded inventions and (2) to allow federal agencies to
grant exclusive licenses for their technology to provide more
incentive to businesses. 

In 1987, the Department of Commerce issued regulations, which are
codified in 37 C.F.R.  401, to implement Bayh-Dole.  Some of the key
provisions of the law and regulations are as follows: 

  -- Unless the agency informs the university at the time funding is
     provided that the agency will retain title to inventions derived
     from the projects funded because of specifically identified
     "exceptional circumstances" or other specified conditions, the
     university is entitled to retain ownership of any inventions
     created as a result of the funding. 

  -- The university must disclose to the appropriate federal agency
     any invention created with the use of federal funds within 2
     months of the date the inventor discloses the invention in
     writing to the university. 

  -- To retain ownership, the university generally must notify the
     agency of its election to retain title within 2 years of the
     date of disclosure.  When publication, sale, or public use has
     initiated the 1-year statutory period in which valid patent
     protection can be obtained in the United States, the agency may
     shorten the period of election to not more than 60 days prior to
     the end of the statutory period. 

  -- The university must provide the U.S.  government a
     nontransferable, irrevocable, paid-up, nonexclusive license
     ("confirmatory license") to use the invention. 

  -- The university must attempt to develop the invention. 
     Otherwise, the government retains the right to take control of
     the invention.  The government also may take control of the
     invention for other reasons, such as a need to alleviate health
     or safety concerns.  This provision is referred to in the law as
     the government's "march-in" rights. 

  -- In granting licenses to use the invention, the university
     generally must give priority to small businesses. 

  -- When granting an exclusive license, the university must ensure
     that the invention will be "manufactured substantially" in the
     United States. 

  -- The university must share a portion of the royalties with the
     inventor(s). 

While a discussion of the impact of the Bayh-Dole Act in connection
with large businesses is beyond the scope of this report, the basic
provisions of the act--which apply only to universities, other
nonprofit organizations, and small businesses--were extended to large
businesses by Executive Order 12591, dated April 10, 1987. 


   FEDERAL OVERSIGHT AND
   ADMINISTRATION OF BAYH-DOLE IS
   DECENTRALIZED
------------------------------------------------------------ Letter :3

In fiscal year 1995, U.S.  universities received about $12.1 billion
in direct federal funds for science and engineering R&D and
controlled billions more through their affiliations with other
nonprofit research institutions and their management of federally
funded research and development centers.  All of these funds were
subject to the provisions of the Bayh-Dole Act, as administered by
the funding agencies and the recipient universities. 

By design, federal oversight of Bayh-Dole is decentralized--that is,
each funding agency administers the law as it applies to grants and
contracts.  For university projects, the bulk of the administration
is left to the universities, which must meet specific requirements
related to disclosing, reporting, and licensing inventions.  For the
most part, the agencies' activities are limited to collecting and
managing the information submitted by the universities. 


      UNIVERSITIES' FUNDING
      SUBJECT TO BAYH-DOLE MAY BE
      DIRECT OR INDIRECT
---------------------------------------------------------- Letter :3.1

The best aggregate information on federal funding subject to
Bayh-Dole is that accumulated and reported by the National Science
Foundation (NSF), which annually surveys federal agencies to obtain
information on funds awarded for research by type and recipient. 
According to NSF, direct federal funding to universities for science
and engineering R&D totaled $12.1 billion in fiscal year 1995.  As
shown in table 1, 98.1 percent of this funding was provided by eight
agencies.  (App.  II shows fiscal year 1995 funding to the top 100
universities receiving funds.)



                                Table 1
                
                Funding to Universities for Science and
                   Engineering R&D, by Eight Federal
                     Agencies, in Fiscal Year 1995

                         (Dollars in thousands)

Agency                               Award amounts    Percent of total
------------------------------  ------------------  ------------------
Health and Human Services               $6,511,543                54.0
National Science Foundation              1,731,968                14.4
Department of Defense                    1,609,588                13.3
National Aeronautics and Space             696,201                 5.8
 Administration
Department of Energy                       601,019                 5.0
Department of Agriculture                  440,617                 3.7
Environmental Protection                   148,657                 1.2
 Agency
Department of Commerce                      94,960                 0.7
Other                                      233,889                 1.9
======================================================================
Total                                  $12,068,442               100.0
----------------------------------------------------------------------
Source:  NSF. 

Within these departments and agencies, the level of funding
attributable to individual agencies, functions, or services varies
widely.  In the Department of Health and Human Services (HHS), for
example, about 98 percent of the funding comes from one agency--the
National Institutes of Health (NIH).  In the Department of Defense
(DOD), however, funding is split among the Army (14.2 percent), Navy
(27.4 percent), Air Force (13.5 percent), and the remaining Defense
agencies (45.0 percent).  (App.  III shows direct funding for science
and engineering R&D from all federal departments and agencies in
fiscal year 1995.)

The statistics in table 1 do not include R&D funds the departments
and agencies provide to other organizations affiliated with
universities.  There are two primary types of such organizations: 
(1) other nonprofit institutions and (2) federal laboratories
designated as Federally Funded Research and Development Centers
(FFRDC). 

Federal agencies provide R&D funding to certain nonprofit
institutions other than universities.  Institutions of this type
include such organizations as research hospitals, independent
laboratories, and other research-specific institutes.  In fiscal year
1995, federal funding for science and engineering R&D at nonprofit
institutions other than universities totaled $3.3 billion, according
to NSF.  Some of these nonprofit institutions are managed or staffed
by universities, although NSF does not separate or identify these in
its statistical reports.  For example, the Harvard Medical School
provides staff for five independent hospitals, which in total
received $191.5 million in direct science and engineering R&D funds
in fiscal year 1995. 

Similarly, the reach of the Bayh-Dole Act through universities is
greater because of funding provided to FFRDCs that are administered
by universities.  According to NSF, federal agencies provided $3.6
billion in science and engineering R&D funding to 18 such
organizations in fiscal year 1995.  (App.  IV shows each of these
FFRDCs, the administering university, and the funding for fiscal year
1995.) One example of a university-managed FFRDC is Lincoln
Laboratories, which is managed by the Massachusetts Institute of
Technology (MIT) and received $314.2 million in federal R&D funds in
fiscal year 1995. 


      THE ADMINISTRATION OF THE
      BAYH-DOLE ACT IS
      DECENTRALIZED AND RELIES
      HEAVILY ON VOLUNTARY
      COMPLIANCE BY THE
      UNIVERSITIES
---------------------------------------------------------- Letter :3.2

The administration of the act is decentralized.  Each federal agency
awarding R&D funds is required to ensure that the universities
receiving such funds abide by the act's requirements.  The agency
that comes closest to coordinating the Bayh-Dole Act is the
Department of Commerce.  The act, as amended, provided that Commerce
could issue regulations for the program and establish standards for
provisions in the funding agreement entered into by federal agencies
and universities, other nonprofit institutions, and small businesses. 
Commerce did so in 1987.  Commerce is looked upon by the other
agencies as a type of coordinator and may be consulted when questions
arise.  However, Commerce does not maintain any overall Bayh-Dole
database. 

Commerce officials told us that they see their overall role in
administering the Bayh-Dole Act as one of facilitating its operation. 
They support the objectives of Bayh-Dole and believe the law has
achieved its objective of getting more government-funded inventions
to those who can make use of them.  They had few details on how
individual agencies administered Bayh-Dole, however.  They said that,
to their knowledge, the march-in rights provision had never been
asserted by any agency.  As discussed in appendix V, NIH refused to
initiate march-in procedures in the one case in which a petition was
filed.  Commerce officials noted that, as provided by law, the act is
largely self-regulating in that the primary responsibility is placed
upon the universities to comply voluntarily with the act. 

To learn more about how the funding agencies were administering the
act, we contacted officials at the eight agencies listed in table 1
that grant the most funds subject to the act's requirements.  We
discussed the procedures followed by the agencies, the databases that
had been established to record and monitor the information provided
to the agencies by the universities, and the program's results and
achievements.  (App.  V provides a brief description of each agency's
activities.) Generally, we found the following: 

  -- The funding agencies generally had not established separate
     operating procedures for Bayh-Dole but did include a provision
     showing the act's applicability in individual funding
     agreements.  In most cases, the universities were allowed to use
     their own forms for the various notifications required by the
     act. 

  -- The agencies we visited relied on the universities to ensure
     that all federally funded inventions were meeting the
     requirements of the law and regulations.  Some agency officials
     said they use their post-grant or contract reviews to see if any
     of the results reported in the documentation indicated an
     invention that was not reported under the provisions of the act. 
     If so, they said that they would query the university to
     determine if there was in fact an invention that should have
     been reported.  However, they did not document these activities
     in such a way that the frequency or results of these reviews
     could be determined. 

  -- The agencies' monitoring activities consisted largely of
     collecting and recording the information the universities
     provided.  The agencies generally did not have data for some
     areas, such as whether the universities were giving priority to
     small businesses in licensing or how they ensured substantial
     domestic manufacture under exclusive licenses.  The one area of
     compliance that most agencies did stress was that the
     universities provide the confirmatory licenses to the
     government. 

  -- Those agencies most involved in administering Bayh-Dole--NIH,
     NSF, and DOD--were also those agencies with the most funding
     subject to the act. 

  -- The confirmatory licenses are provided to Commerce's Patent and
     Trademark Office (PTO), which maintains the information in the
     Government Register and makes it available to those who need it. 
     We did not attempt to review how the federal agencies actually
     make use of confirmatory licenses. 

  -- Generally, the agencies did not appear to be pursuing the
     licensing of university-created inventions on their own when the
     universities elected not to retain title.  Some officials said
     that if commercialization did not appeal to the university or
     the inventor, it usually had no appeal to the government either. 

  -- None of the agencies had made analyzed the impact of the act,
     although all were pleased with the way the act was working and
     said that it should be resulting in more federally supported
     inventions reaching the marketplace. 

Probably the most aggressive system for monitoring the Bayh-Dole Act
was that established by NIH.  In October 1995, NIH deployed its
"Edison" system for monitoring the act's reporting requirements.  NIH
designed Edison at least in part to respond to criticism from the HHS
Inspector General that it was not properly documenting reporting
under the act. 

Edison is a real-time, computer-based system that uses the Internet
and allows (1) the university to enter data into the system as needed
and (2) the agency to review and analyze the activity on any
particular invention at any time.  In addition to showing all of the
significant reporting elements of the act, Edison provides the agency
with the ability to know when a particular report or activity is due. 
For example, the system alerts the agency when a university is
nearing the end of the period during which it has to make an election
on retaining title to an invention.  Edison also allows the agency to
produce reports that detail activity for a particular university,
invention, time period, and so on.  At present, Edison is optional,
and universities can use paper documents rather than entering data
electronically if they so choose.  NIH officials said that the goal
is eventually to make Edison a completely paperless system, but at
present even those who enter data electronically must provide a paper
backup for documents that require a signature. 

In designing Edison, NIH wanted to develop a system that could be
used governmentwide.  However, some agencies did not elect to use it
for various reasons:  (1) They believed at the time that NIH would
require the agency to pay a fee, (2) the agency did not have enough
inventions activity to warrant such an elaborate database, (3) the
agency already had a database that was meeting its needs, or (4) the
agency did not believe that the Edison format was adaptable to its
own inventions-oversight programs or those of its recipient
universities.  At the time of our review, NIH had signed memorandums
of understanding with six agencies to use Edison.  These agencies
were NSF, Agriculture, the National Oceanic and Atmospheric
Administration within Commerce, the Centers for Disease Control and
Prevention and the Food and Drug Administration within HHS, and the
Agency for International Development within the Department of State. 
According to NIH officials, none of the agencies are required to pay
a fee for using Edison. 


   UNIVERSITIES VISITED BY GAO HAD
   ESTABLISHED INVENTION PROGRAMS
   TO IMPLEMENT BAYH-DOLE
------------------------------------------------------------ Letter :4

On the basis of our visits to 10 universities that were among the
largest in terms of federal R&D funding and licensing income, we
found that the universities had established programs to meet the
requirements of the Bayh-Dole Act, designating units and personnel to
oversee the activities involving inventions.  They also had set out
policies and procedures to ensure that their programs were complying
with the act's reporting requirements, that they were pursuing
licensing opportunities to the extent possible, and that royalties
were being shared with those responsible for the inventions. 


      UNIVERSITIES WERE AMONG THE
      LEADERS IN R&D FUNDS AND
      LICENSING INCOME
---------------------------------------------------------- Letter :4.1

We visited 10 universities that had extensive Bayh-Dole activities
because of their high volume of federal funding, their high level of
licensing income, or both.  Table 2 shows these 10 institutions,
their direct federal science and engineering R&D funding for fiscal
year 1995, their licensing income for fiscal year 1996, and their
ranking according to other universities nationwide in both areas. 



                                Table 2
                
                  Federal Science and Engineering R&D
                    Funding for Fiscal Year 1995 and
                 Licensing Income for Fiscal Year 1996
                      for Universities GAO Visited

                         (Dollars in thousands)

                           Federal research
                           funding, fiscal        Licensing income,
                             year 1995\a           fiscal year 1996
                        ----------------------  ----------------------
University                  Amount        Rank      Amount        Rank
----------------------  ----------  ----------  ----------  ----------
Johns Hopkins             $569,329           1      $3,091          23
 University
University of              299,631           2       8,651          10
 Washington
MIT                        282,120           3      10,083           8
Stanford University        266,744           4      43,752           2
University of Michigan     243,126           5       1,075          48
University of              207,504           8      13,092           5
 Wisconsin-Madison
Harvard University         191,499          13       7,642          11
Columbia University        186,179          14      40,632           3
Michigan State              69,175          55      17,232           4
 University
University of            1,071,280          \b      63,200           1
 California
Total                   $3,386,587                $208,450
----------------------------------------------------------------------
\a Does not include federal funds provided to affiliated
organizations, such as research hospitals using university staff or
FFRDCs administered by universities. 

\b The University of California has a centralized technology transfer
office providing oversight for nine campuses.  Since we visited the
central office, the total shown is for all nine campuses.  The
highest-ranking single campus receiving funds was San Diego, which
ranked number 6 overall, although 7 of the 9 campuses were among the
top 61. 

Source:  NSF and AUTM. 

The universities we visited accounted for over 28 percent of the
direct science and engineering research funding awarded to
universities in fiscal year 1995 and received 57.1 percent of all
licensing income going to universities in fiscal year 1996.  (Apps. 
VI through XV describe the Bayh-Dole activities at each of the 10
universities.)


      UNIVERSITIES HAD ESTABLISHED
      PROGRAMS TO ADMINISTER
      INVENTIONS RESULTING FROM
      RESEARCH
---------------------------------------------------------- Letter :4.2

Each of the universities we visited had established specialized units
to handle the reporting and licensing of inventions under the
Bayh-Dole Act.  On the basis of our visits and discussions with
personnel in the federal funding agencies and AUTM, we determined
that four different types of programs are in place nationwide.  These
are as follows: 

  -- Centralized licensing office.  In this type of office, all
     activities are concentrated in one centralized unit.  An example
     of such an office is the Technology Licensing Office at MIT,
     which coordinates activities MIT-wide, including any inventions
     coming out of Lincoln Laboratory, an FFRDC. 

  -- Decentralized licensing offices.  In this type of office,
     reporting and licensing activities are carried out by separate
     offices in the various schools, departments, and other units of
     the university.  Johns Hopkins, for example, has three licensing
     offices--one for the medical school, one for its Applied Physics
     Laboratory, and one for the remainder of the university. 

  -- Foundation.  In this type of program, the licensing activities
     are carried out by an independent foundation specifically set up
     for this purpose, although the university may retain an office
     to handle reporting on Bayh-Dole activities.  This scenario
     appears to be more common among state universities.  Wisconsin's
     licensing unit--the Wisconsin Alumni Research Foundation
     (WARF)--is an example of an independent foundation. 

  -- Contractor.  Some universities contract out some or all of their
     licensing activities.  One of the largest such contractors is
     Research Corporation Technologies, Inc.  (RCT), of Tucson,
     Arizona.  Michigan State, one of the universities we visited,
     used RCT previously but now has a centralized office handling
     these activities. 

Some universities have programs that combine these various types of
reporting and licensing units.  For example, Harvard has a
centralized unit for administration and reporting purposes but has a
separate unit that handles licensing for the medical school. 


      UNIVERSITIES DEVELOPED
      POLICIES AND PROCEDURES FOR
      BAYH-DOLE
---------------------------------------------------------- Letter :4.3

Officials at each of the universities visited said that (1) the only
procedures for Bayh-Dole were the law itself and the regulations
issued by Commerce, (2) the agencies generally do not make site
visits to monitor compliance with the act, (3) a primary interest of
the agencies is ensuring that they receive the confirmatory licenses,
and (4) the agencies do not become involved in the licensing
activities. 

We looked at the procedures that each of the universities implemented
to monitor compliance with Bayh-Dole.  We found that the institutions
had their own publications, forms, requirements, and so on for
identifying inventions, recording data, reporting to the funding
agencies, licensing inventions, and sharing royalties. 


         IDENTIFYING INVENTIONS
-------------------------------------------------------- Letter :4.3.1

Officials at the universities visited said that they used various
methods to identify inventions created through the use of federal
funds.  Most, for example, have developed information to inform
researchers of the Bayh-Dole Act's and the university's requirements
for inventions as well as the benefits that are available from such
inventions.  Also, the universities have handbooks and other
brochures that set out the requirements and the university's
conflict-of-interest policy.  Some encourage the researchers to
discuss their work while it is ongoing to get feedback on what
inventions might come out of the research and when they should be
reported.  Some universities also review post-grant and contract
documentation and faculty publications to see if any results were
discussed that might indicate an invention. 

The policies varied among the universities in connection with how
they determined whether the invention was created with government
funds.  University officials said that the best resource for
determining the source of funds is the researcher, who usually works
on a specific grant or contract from which the invention came.  The
universities held that if funding came from more than one source, the
invention was considered subject to Bayh-Dole if any federal money at
all was involved in the work.  Officials at one university said that
they presume an invention is subject to Bayh-Dole if anyone working
in the same laboratory was getting any federal funds on any project. 


         RECORDING DATA
-------------------------------------------------------- Letter :4.3.2

The 10 institutions we visited had their own computerized invention
databases for monitoring Bayh-Dole activities.  While these varied
somewhat in form and format, they all included certain background
data, such as the inventor, grant, and type of invention, as well as
key reporting dates and events concerning Bayh-Dole, patent
prosecution, and licensing activities.  Some of the more extensive
databases provided information on costs, fees, and royalties.  Some
of the universities reporting to NIH were using Edison as a parallel
system. 


         REPORTING TO FUNDING
         AGENCIES
-------------------------------------------------------- Letter :4.3.3

Each of the universities visited had systems that allowed them to
track dates and meet reporting deadlines for all Bayh-Dole
requirements.  However, some university officials noted that
determining compliance with certain requirements can be difficult. 
For example, as noted above, it may be difficult to tell when an
invention actually was conceived or when the university first learned
of it.  University officials told us that, as a practical matter, it
may not be possible to know whether an invention exists until there
is at least a preliminary patent search.  Thus, how to meet the
requirement in the regulations to report an invention within 2 months
is unclear. 


         LICENSING
-------------------------------------------------------- Letter :4.3.4

The universities we visited were attempting to license their
inventions.  Often, these activities begin prior to the university's
electing to retain title to the invention, since there may be little
benefit to retaining title to an invention and incurring the costs of
obtaining a patent if it cannot be licensed.  The universities varied
in how they determined whether to retain title.  Officials from Johns
Hopkins, for example, said that they usually will not retain title to
an invention unless they believe that it is useful to the public and
they can license it and at least recoup the costs.  Officials at
Harvard said that they generally elect to retain title on everything
but would pursue a patent only if the invention would make money. 
They also said that even if they do obtain a patent on an invention,
they may abandon the patent if it is not making money, rather than
elect to pay the maintenance fees for the patent. 

The universities required the licensee to pay the costs of
prosecuting and maintaining the patent on the invention, which would
include patent fees.  While most universities had in-house legal
staff, most used outside counsel for obtaining and enforcing the
patents. 

Officials at some of the universities visited told us that they would
assist with raising capital, help form start-up companies, or take an
equity interest in lieu of royalties.  However, this practice is not
always a preferred choice for licensing.  Such companies have the
potential for creating ethical dilemmas and conflicts of interest
because the university's primary goal in research is to pursue
knowledge rather than make money. 

None of the universities visited had a specific policy in place to
give priority to small businesses in licensing.  However, the
majority of the inventions they licensed were licensed to small
businesses.  Some university officials said that companies rarely
compete for the right to license.  In addition, licensing priority
often is given to a company that was a co-sponsor of the project from
which the invention came, regardless of the company's size. 

In the licensing agreements, the universities were requiring their
exclusive licensees to substantially manufacture the products in the
United States.  However, the universities have no practical method
for ensuring that this is done, other than requiring it in the
licensing agreement. 


         SHARING ROYALTIES
-------------------------------------------------------- Letter :4.3.5

Each of the universities visited had procedures for sharing royalties
with inventors and others, such as the department or laboratory in
which the inventor worked.  In some cases, the formula could be
complicated, depending on the royalties received, the persons
involved, the type of invention, and so on.  Typically, the
universities would have different royalty-sharing provisions for
different levels of revenue.  For example: 

  -- Johns Hopkins' medical school uses a sliding scale for
     royalties.  For the first $100,000 in annual revenues, the
     distribution is 35 percent to the inventor, 30 percent to the
     inventor's laboratory, 10 percent to the inventor's department,
     23 percent to the medical school, and 2 percent to the
     university.  At $1 million to $3 million in annual revenues, the
     distribution is 15 percent to the inventor, 10 percent to the
     inventor's laboratory, 15 percent to the inventor's department,
     50 percent to the medical school, and 10 percent to the
     university. 

  -- Harvard also uses a sliding scale in distributing royalties,
     shifting a portion of the inventor's share to the inventor's
     department as royalties increase.  The first $50,000 generated
     by an invention is distributed 35 percent to the inventor, 30
     percent to the inventor's department, 20 percent to the
     inventor's school, and 15 percent to the university.  Income
     greater than $50,000 is distributed 25 percent to the inventor,
     40 percent to the inventor's department, 20 percent to the
     inventor's school, and 15 percent to the university. 

  -- WARF, the University of Wisconsin-Madison's licensing
     foundation, gives the inventor $1,500 up front when a new
     invention's patent application is assigned to the foundation. 
     In addition, WARF distributes royalty income to the inventors
     and the university according to a formula set by the university. 
     The current formula provides that the first $100,000 in gross
     income is divided 70 percent to the inventor's laboratory, 20
     percent to the inventor, and 10 percent to WARF.  Gross income
     greater than $100,000 is divided 65 percent to WARF, 20 percent
     to the inventor, and 15 percent to the inventor's department. 

The Bayh-Dole Act requires that royalties be shared with the inventor
but is silent as to what the percentage should be.  As discussed
above, the inventor's portion can vary substantially, depending on
the university and the amount of royalties derived from the
invention.  If there was more than one inventor, the institutions we
visited divided the inventor's royalty share among the co-inventors. 


   UNIVERSITY-BASED INVENTIONS
   APPEAR TO HAVE A GROWING IMPACT
------------------------------------------------------------ Letter :5

The officials at the universities and agencies we visited believed
the Bayh-Dole Act was accomplishing its objectives.  They said that
the universities and their researchers were benefiting because they
could receive royalties on their inventions.  The government and the
public were benefiting because more government-funded technology was
being brought to those who could make use of it. 

Despite the perception that Bayh-Dole is working well, none of the
federal agencies or universities we contacted evaluated the effects
of Bayh-Dole.  The only available nationwide data on the effects are
those published by AUTM.  While limited in application because they
apply to all inventions regardless of funding source and are based on
a survey of participants, AUTM's statistics nevertheless indicate
that universities are increasing their licensing activities and that
revenues from licenses are growing.  AUTM also believes that the
activities involving inventions have added to the economy in general. 

Success with inventions and licensing varied widely among the
universities we visited.  However, we noted that most of them had at
least one notable invention.  We also noted that, to date, most of
the revenues generated by the universities came from a small number
of inventions. 


      AUTM'S SURVEY INDICATES A
      CONTINUING INCREASE IN
      ACTIVITIES INVOLVING
      INVENTIONS
---------------------------------------------------------- Letter :5.1

The only nationwide evaluations of universities' activities involving
inventions are those carried out by AUTM, a nonprofit organization
formed to assist university intellectual property administrators in
the effective transfer of technology to the public.  Each year, AUTM
surveys universities, other research institutions, and patent
management firms to obtain information on licensing activities.  The
most recent survey report, which became available in January 1998,
includes new data for fiscal year 1996 as well as data reported in
earlier surveys dating to fiscal year 1991. 

The AUTM survey is limited in its application to Bayh-Dole R&D
because the survey covers the activities involving inventions by the
universities from all funding sources--not just federal.  Also, the
AUTM survey is limited as an evaluation device in that (1) the data
are based on a survey sent to the organizations, (2) not all
organizations respond, (3) respondents report data according to their
own fiscal year, and (4) no independent verification or validation of
the data is provided.  The AUTM report states that "[T]he information
contained in the Survey reports is best used as a starting place or
as a point of departure for more extensive analysis."

AUTM sent the fiscal year 1996 survey to 212 research universities
and received 131 responses, a response rate of 58 percent.  However,
the response rate among the top 100 universities--as measured by
direct federal R&D funding based on NSF statistics--was 89 percent. 
These institutions accounted for 95 percent of all revenues reported. 

As noted above, in interpreting the data, it is not possible to
isolate the impact of inventions related to Bayh-Dole.  Rather, the
universities report their activities for all inventions.  Also, it is
difficult to measure the increase in activity from year to year
because the number of respondents differs by year.  For this reason,
AUTM presents data for all respondents as well as for those
respondents that have participated continuously in the survey in
fiscal years 1991 through 1996.  Some of the survey's major reported
results are as follows: 

  -- The 131 universities responding reported total sponsored
     research expenditures of about $18.7 billion in fiscal year
     1996.  Of this amount, $12.3 billion, or 65.9 percent, was from
     federal government sources. 

  -- In total, the respondent universities reported invention
     disclosures of 8,119, up 9.3 percent from the 7,427 disclosures
     of fiscal year 1995.  For the recurring respondents, the percent
     of increase in disclosures was 9.4 percent. 

  -- Total U.S.  patent applications were down.  Respondents reported
     5,100 applications for fiscal year 1995 compared with 3,872 for
     fiscal year 1996, a decrease of 24.1 percent.  Total patent
     applications for recurring respondents were down 26.5 percent. 
     New patent applications for all respondents increased, from
     2,373 to 2,734, or 15.2 percent.  New applications for recurring
     respondents increased 13.1 percent. 

  -- The number of U.S.  patents issued to the respondents increased
     14.6 percent, from 1,550 in fiscal year 1995 to 1,776 in fiscal
     year 1996.  Among recurring respondents, the increase was 12.4
     percent. 

  -- New licenses or options executed by all respondents increased
     slightly in fiscal year 1996, from 2,142 to 2,209, or 3.1
     percent.  Recurring respondents reported a larger increase of
     8.4 percent.  About 10.9 percent of the licenses or options
     granted in fiscal year 1996 for all respondents were to start-up
     companies, 54.7 percent were to small businesses (500 or fewer
     employees), and 34.4 percent were to large businesses.  Slightly
     more than half, or 51.3 percent, of the new licenses or options
     were exclusive. 

  -- At the end of fiscal year 1996, the universities were reporting
     10,487 active licenses or options, up 12.9 percent from the
     9,287 reported in fiscal year 1995.  Licenses or options
     actually producing income increased by 16.1 percent, from 4,272
     in fiscal year 1995 to 4,958 in fiscal year 1996. 

  -- Gross license income received increased dramatically in the
     latest survey.  Respondents reported income of $365.2 million,
     an increase of 22.1 percent over the $299.1 million reported for
     fiscal year 1995.  Recurrent respondents reported an increase of
     20.6 percent in licensing income in fiscal year 1996. 

  -- New research funding generated by or related to licenses and
     options during fiscal year 1996 totaled $155.7 million, an
     increase of 38.4 percent over the $112.5 million for fiscal year
     1995. 

The AUTM survey report concluded that the economic impact of
licensing activities undertaken by academic institutions, nonprofit
organizations, and patent management firms is extensive.  Using a
model that (1) measures pre-production investment (investment made
prior to the sales of licensed products) and (2) uses estimates of
post-production sales of products by licensees to convert sales to
jobs, the AUTM survey report estimated that the licensing activities
of those academic institutions, nonprofit organizations, and patent
management firms participating in its survey add more than $24.8
billion and 212,500 jobs to the U.S.  economy each year.  While the
survey did not show how much of these amounts is contributed by
universities alone, it did show that 61.7 percent of all licensing
income reported was reported by universities. 

For the reasons discussed earlier, we did not verify the accuracy of
the model or the projections made by AUTM for economic impact, nor
did we attempt to determine what portion of this impact was
attributable to Bayh-Dole.  The underlying data are based on
unverified information reported on a survey.  Furthermore, the
projections are based on one approach for measuring economic impact;
other approaches might yield substantially different results.  Also,
the projections cover the impact of all licensing activities, not
just those attributable to federal funding and not just those
attributable to universities.  (App.  XVI provides a summary of
universities' invention activities for fiscal years 1995 and 1996,
for all respondents as well as for those who have responded each year
of the survey.)


      UNIVERSITIES WERE AMONG THE
      MORE SUCCESSFUL IN
      ACTIVITIES INVOLVING
      INVENTIONS
---------------------------------------------------------- Letter :5.2

The universities we visited were among the leaders in activities
involving inventions.  According to the AUTM survey report, for
example, the 10 institutions we visited ranked among the top 29
respondent universities in disclosures of inventions, the top 16 in
U.S.  patents applied for, and the top 26 in patents issued during
fiscal year 1996. 

Similarly, the institutions visited were among the leaders in
licensing activities:  The 10 universities collectively hold 3,721
active licenses or options, or 35.5 percent of active licenses held
by all respondent universities.  These institutions accounted for
30.7 percent of new licenses or options and 57.1 percent of all
licensing revenues received by the respondent universities during
fiscal year 1996. 

Like other institutions responding to the AUTM survey, the 10
institutions visited had less than half--1,768--of their active
licenses producing income.  However, there appears to be a disparity
in earnings even among those inventions producing income.  During our
visits to the universities (as discussed in apps.  VI through XV), we
found that the bulk of the revenues was generated by a relatively
small number of inventions.  An AUTM official said that this gap is
somewhat misleading because products may take several years to begin
producing revenues. 

The institutions visited pointed to a number of successful inventions
they believed showed that university research subject to the
Bayh-Dole Act was having a positive impact.  For example: 

  -- In 1989, University of Wisconsin researchers developed a
     solution that extends the time that human organs can be held
     outside the body prior to transplant.  This invention has
     generated an estimated $8 million to $10 million in licensing
     income. 

  -- In fiscal year 1996, 72 percent of Stanford's licensing income
     came from one invention.  This invention, recombinant DNA,
     actually dates to the 1970s and was funded in part by NIH and
     NSF.  More recently, Stanford and the University of California
     developed phycobiliproteins, which, among other things, are used
     to detect cancerous tumors.  This invention earns about $3
     million a year. 

  -- The University of Washington has two inventions--known as the
     Hall technologies--that generate the bulk of the university's
     royalties.  One of these involved the creation of a Hepatitis B
     vaccine and the other involved a method for using yeast to
     produce interferon, a cancer treatment drug. 

  -- One of Columbia University's higher-profile inventions is the
     co-transformation process, a gene transfer process that can
     produce a specific protein for commercial production.  Patented
     in 1983, this invention has been used by 28 companies in making
     new pharmaceuticals and was critical in the development of a
     protein used to dissolve blood clots. 

At the universities we visited, the more marketable technologies
appeared to be in the area of life science and to come largely from
NIH funding.  The 1996 AUTM survey asked respondents to show what
portion of overall income was related to life science and to physical
science.  Among those universities reporting these data, 80.2 percent
of all fiscal year 1996 revenues came from life science. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

We transmitted a draft of this report to the Department of Commerce
for its review and comment.  The Department suggested some technical
clarifications.  We agreed with each of these clarifications and
incorporated them into our report as appropriate.  The Department
also suggested that we cite all previous GAO reports that concerned
Bayh-Dole.  We did not believe this was necessary because most of
these reports were more than 10 years old.  We did list our most
recent report, which was issued in 1991.  The full text of Commerce's
comments is included in appendix XVII. 


---------------------------------------------------------- Letter :6.1

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 3 days after the date of this
letter.  At that time, we will send copies to the appropriate House
and Senate committees; interested Members of Congress; the Secretary
of Commerce; the Director, Office of Management and Budget; and other
interested parties.  We will make copies available to others upon
request. 

This report was prepared under the direction of Susan Kladiva,
Associate Director of Energy, Resources, and Science Issues, who may
be reached at (202) 512-7106 if you or your staff have questions. 
Major contributors to this report are listed in appendix XVIII. 

Victor S.  Rezendes
Director, Energy, Resources,
 and Science Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Public Law 102-204 (35 U.S.C.  section 202(b)(3)) requires the
Comptroller General to review, at least once every 5 years, the
implementation of the Bayh-Dole Act, which promotes the use of
federally funded inventions by small businesses and nonprofit
organizations, and to issue a report to the House and Senate
Committees on the Judiciary.  Our last report in direct reference to
Bayh-Dole implementation was Technology Transfer:  Federal Agencies'
Patent Licensing Activities (GAO/RCED-91-80), issued April 3, 1991. 
In that report, we focused largely on the granting, selling, and
licensing of government-owned inventions.  Since that report, we have
issued a number of reports concerning patent issues.\1

For our current review, we met with staff from the Senate Committee
on the Judiciary and from the Courts and Intellectual Property
Subcommittee of the House Committee on the Judiciary to discuss those
issues that should be addressed in our current report.  We agreed to
focus on the manner in which Bayh-Dole is being implemented by
research universities.  To do this, we would provide information on
(1) the administration of the Bayh-Dole Act by the eight largest
federal agencies that fund research and development (R&D), (2) the
administration of the Bayh-Dole Act by 10 of the largest U.S. 
research universities, and (3) the impact of the Bayh-Dole Act,
largely based on annual surveys of research universities conducted by
the Association of University Technology Managers (AUTM). 

To learn more about how the federal agencies were administering the
act, we first contacted officials from the Department of Commerce,
which issued regulations on Bayh-Dole.  We then contacted officials
at each of the eight agencies granting the most funds subject to the
act's requirements,\2 as determined by the statistics on funding for
science and engineering research developed by the National Science
Foundation (NSF).  In addition to Commerce and NSF, these agencies
included the Department of Health and Human Services (HHS), the
Department of Defense (DOD), the Department of Energy (DOE), the
National Aeronautics and Space Administration (NASA), the Department
of Agriculture (USDA), and the Environmental Protection Agency (EPA). 
The agencies we contacted accounted for 97.8 percent of all direct
federal funding to universities for science and engineering research
in fiscal year 1995. 

At each of the funding agencies visited, we discussed with agency
officials the procedures that had been implemented, the databases
that had been established to record and monitor the information
provided by the universities, and the program's results and
achievements.  In some of the agencies, more than one unit granted
funds.  In these cases, we contacted those units that were
responsible for the majority of the funding.  In this connection, we
worked with the National Institutes of Health (NIH) in HHS and with
the Army, Navy, and Air Force within DOD. 

To learn more about how universities were administering the act, we
visited 10 universities that had extensive Bayh-Dole activities.  We
selected universities that had a high volume of federal funding,
according to NSF, or high levels of licensing income, according to
AUTM.  From these, we chose Johns Hopkins University, ranked number 1
by NSF and number 23 by AUTM; the University of Washington, ranked
number 2 by NSF and number 10 by AUTM; the Massachusetts Institute of
Technology, ranked number 3 by NSF and number 8 by AUTM; Stanford
University, ranked number 4 by NSF and number 2 by AUTM; the
University of Michigan, ranked number 5 by NSF and number 48 by AUTM;
the University of Wisconsin-Madison, ranked number 8 by NSF and
number 5 by AUTM; Columbia University, ranked number 14 by NSF and
number 3 by AUTM; Michigan State University, ranked number 55 by NSF
and number 4 by AUTM; Harvard University, ranked number 13 by NSF and
number 11 by AUTM; and the University of California, which would have
been ranked number 1 by NSF if all campuses had been included in the
calculations and was ranked number 1 by AUTM. 

For each of the universities selected, we visited the technology
transfer office and in some cases the office overseeing grants
administration.  We met with officials and discussed the funding that
is subject to the Bayh-Dole Act at the university and any affiliated
organizations, procedures that had been implemented to administer the
act, databases that had been established to record and monitor the
information gathered on inventions by the university, the methods by
which the university was ensuring that it met the reporting and other
requirements of the act, the university's relationships with Commerce
and the funding agencies, and the program's results and achievements. 
The universities we contacted accounted for 28.1 percent of all
direct federal funding to universities for science and engineering
research in fiscal year 1995 and for 57.1 percent of licensing income
reported by all universities to AUTM in fiscal year 1996. 

To determine how the AUTM data could be used to measure the impact of
the act, we discussed with AUTM officials the procedures and
methodologies involved in the annual surveys of universities and
other organizations and obtained the survey reports for fiscal years
1995 and 1996.  We used the fiscal year 1995 report to select
universities for our case studies; however, we have updated the
information in our report to show the results of the fiscal year 1996
survey report. 

To assess the quality of the data obtained through the AUTM survey,
we reviewed copies of the survey instruments that AUTM used in
collecting data for fiscal years 1991 through 1996.  We looked at the
clarity of questions and the layout of the questionnaire,
concentrating on features of the survey that could affect the
collection of data across several years.  In this connection, we
explored the consistency of questions asked in multiple years and the
effects of changes in wording.  We also examined the use of
definitions and how changes in definitions might affect data across
the years of the survey's administration.  In addition to discussing
the AUTM data with each of the 10 universities we visited, we
interviewed officials from Emory University to understand how
questions might be interpreted by respondents. 

While we believe the AUTM data are the best available showing
universities' licensing activities, important limitations restrict
the use of the data in reaching any conclusions in our report.  These
are as follows: 

  -- The AUTM data are based on a survey; therefore, the data
     available come from those who were willing to respond.  There is
     no information on those who were not surveyed or those who did
     not respond. 

  -- The AUTM data are not verified or validated, although AUTM does
     follow-up work in an attempt to improve the uniformity of the
     responses. 

  -- The AUTM data include all research activities, not just those
     associated with federally funded inventions; thus, the
     inventions subject to the Bayh-Dole Act cannot be segregated. 

  -- The universities report data according to their own fiscal
     years, which may differ from the fiscal year of other
     universities and the federal government. 

  -- For some elements of the data, the definitions included in the
     survey were improved or changed over the years in which the
     survey has been administered in ways that might increase or
     decrease the reporting of the data. 

Despite these limitations, we have included the data from the AUTM
survey reports in our own report with the appropriate caveats because
(1) they are the only data available on technology transfer by
universities nationwide; (2) the schools reporting showed an
aggregate of 65.9 percent of their research expenditures coming from
federal sources and, thus, applicable to the Bayh-Dole Act; and (3)
university officials recommended the AUTM survey results as the best
data available. 

We did not independently verify the data we obtained from the
agencies, the universities, or AUTM. 

We conducted our review from August 1997 to March 1998 in accordance
with generally accepted government auditing standards. 


--------------------
\1 Patent Examination Statistics (GAO/RCED-96-152R, May 22, 1996);
Intellectual Property:  Enhancements Needed in Computing and
Reporting Patent Examination Statistics (GAO/RCED-96-190, July 15,
1996); Intellectual Property:  Patent Examination and Copyright
Office Issues (GAO/T-RCED/GGD-96-230, Sept.  18, 1996); Intellectual
Property:  Comparison of Patent Examination Statistics for Fiscal
Years 1994 and 1995 (GAO/RCED-97-58, Mar.  13, 1997); and
Intellectual Property:  Fees Are Not Always Commensurate With the
Costs of Services (GAO/RCED-97-113, May 9, 1997). 

\2 We also contacted the Department of Education but did not make a
site visit.  Agency officials told us that there were virtually no
inventions resulting from Education funding to universities and that
the agency had no formal program for administering Bayh-Dole.  The
officials said that if a federally funded invention was identified,
the grants manager would contact Education's Office of General
Counsel and work out the reporting details for the Bayh-Dole Act. 


FEDERAL FUNDING TO UNIVERSITIES
FOR SCIENCE AND ENGINEERING
RESEARCH AND DEVELOPMENT, FISCAL
YEAR 1995
========================================================== Appendix II

                                                                (Dollars in thousands)

                                          Agency                                                Agency
                                --------------------------  ------------------------------------------------------------------------------
Rank      University                    USDA           DOC       DOD        ED       DOE       EPA       HHS      NASA       NSF     Other      Total
--------  --------------------  ------------  ------------  --------  --------  --------  --------  --------  --------  --------  --------  ---------
1         Johns Hopkins                 $251           $42  $288,918      $104    $7,977      $341  $241,726   $19,031   $10,879       $60   $569,329
2         Washington, Seattle          4,844         4,406    31,912       798    15,085       723   193,058    11,117    34,514     3,174    299,631
3         Massachusetts                   80         2,146    68,205         0    68,184     1,867    51,514    44,125    42,736     3,263    282,120
           Institute of
           Technology
4         Stanford                       578           251    39,688         0     6,285     5,757   128,905    56,656    26,058     2,566    266,744
5         Michigan                       361         1,151    21,560       578     6,139    12,547   156,771    12,075    29,630     2,314    243,126
6         California, San                490        10,838    32,680         0    14,069       786   125,573    13,381    40,421       840    239,078
           Diego
7         California, Los                290           404    17,534     3,500    16,051     1,256   146,307     9,255    21,525       301    216,423
           Angeles
8         Wisconsin, Madison          10,112           982    11,443         0    16,282     1,695   119,080    12,608    33,657     1,645    207,504
9         Minnesota                    9,887         1,463    13,748     1,265     5,436     1,973   131,528     2,962    32,921     1,171    202,354
10        Cornell                     14,365            81    20,457         0     4,616     1,304    87,509     4,913    68,163       669    202,077
11        California, San                 46             0     1,972       530     2,878         0   192,001     1,549     2,444       350    201,770
           Francisco
12        Pennsylvania                 1,163            85     8,522         0     6,613       840   161,915       521    17,395       175    197,229
13        Harvard                         99             0     6,894         0     6,140     5,104   141,742     7,046    23,838       636    191,499
14        Columbia, New York               0         1,758     8,797       127     7,711        91   128,638     6,568    31,980       509    186,179
           City
15        Yale                           850             0     6,570         0     9,015         0   151,431     1,529    10,147         0    179,542
16        Pittsburgh                       0             0    11,240     7,473     1,664       150   139,758     1,442     9,576         0    171,303
17        Colorado                       327         4,560    11,802       819     5,265     1,175    96,853    16,100    27,886       586    165,373
18        Washington                     335           139     5,091         0     2,948       238   145,377     3,809     7,436         0    165,373
19        North Carolina,                245           225     6,097       125     2,173     3,442   129,096     1,152    10,814     3,240    156,609
           Chapel Hill
20        Duke University                676            35     4,727         0     5,709     1,786   127,514       706    13,695       150    154,998
21        Pennsylvania State           8,746           369    57,165     1,412     4,066     1,629    46,865     9,264    19,655     3,211    152,382
22        Southern California            110           405    43,934         0     1,217       129    83,739     2,721    17,977     1,947    152,179
23        California, Berkeley        11,476           610    14,589     1,100     4,718     1,221    54,043    23,395    29,977     1,209    142,338
24        Arizona                      5,275           929    11,475       631     4,236     1,518    58,402    35,110    17,244     2,194    137,014
25        Case Western Reserve            30           101     7,107       498       483       202   108,433     4,477     4,787     1,632    127,750
26        Alabama, Birmingham            316             0     1,052     1,379     1,108       182   101,077     8,144     6,933         0    120,191
27        Texas, Austin                  451           355    53,791         0    13,584       625    17,291     7,636    21,423       726    115,882
28        Illinois, Urbana-           10,749            97    22,046       175     2,447       875    25,379     4,105    48,051     1,793    115,717
           Champaign
29        California Institute             0            94    23,234         0     9,204       130    21,815    30,066    25,488     3,653    113,684
           of Technology
30        Rochester                      101             0     5,051         0    24,874       629    67,221     1,235     8,493         0    107,604
31        Chicago                          0           238     2,643         0     3,934         0    77,295     5,732    16,866        15    106,723
32        Northwestern                    60            49    12,626     1,228     4,142       121    59,427     1,430    20,180     3,298    102,561
33        California, Davis            5,787             0     5,150       650    13,200     2,520    50,415     2,553    15,342     3,315     98,932
34        Ohio State                   8,830           700     8,112     2,500     4,562     1,220    42,761     6,937    14,659     6,148     96,429
35        Vanderbilt                     433             0     8,839       460       949       139    77,735     1,519     4,347         0     94,421
36        Iowa                             9           226     3,207       150       816       784    76,789     4,576     6,918       392     93,867
37        Utah                           205           221     9,368         0     4,939         0    62,963     1,205    14,336       546     93,783
38        Maryland, College            5,644         3,341    22,432         0     7,581     1,140     7,436    21,876    19,852     3,399     92,701
           Park
39        Indiana                        205             0     5,552       122     3,247        40    63,849     1,257    14,689        69     89,030
40        Georgetown                      10           167    20,719         0         0         0    50,327       267     1,214    15,765     88,469
41        Boston                         120            59     6,870       897     2,990       140    62,176     2,048    10,790         0     86,090
42        New York                         0           196     2,784       150     3,496       768    69,123       318     8,708         0     85,543
43        Baylor College of              125             0       641       985     1,100        73    79,909     1,243         0         0     84,076
           Medicine
44        Florida                     10,462         1,478     9,373         0     2,248       627    41,016     5,669    11,518     1,311     83,702
45        Miami                          160           939     7,383         0     1,403       256    57,183     3,303    10,076         0     80,703
46        Carnegie Mellon                  0           563    35,467         0     5,792       792     9,325     3,021    24,100     1,167     80,227
47        Virginia                        98         1,077     5,725       274     3,093       466    51,666     5,687     9,792     1,433     79,311
48        Emory                            0             0       771       125       411         0    71,523        23     2,509       401     75,763
49        Texas, SW Medical                0             0        60       250         0         0    72,825     1,769       703         0     75,607
           Center Dallas
50        Georgia Institute of             0           228    44,052         0     2,933     3,614     1,932     7,925    13,767     1,105     75,556
           Technology
51        Princeton                        0         1,126    15,266         0     8,366       452    17,313     4,802    24,100       479     71,904
52        Rutgers                      6,100         2,555     9,477     1,575     4,862       802    24,004     1,267    15,576     5,251     71,469
53        Purdue                      10,541           644    11,031         0     7,948       294    18,779     2,335    19,070       679     71,321
54        State University New             0         1,187     6,953         0     4,569         7    38,166     2,518    16,413       234     70,047
           York, Stony Brook
55        Michigan State              13,421            22     2,702     1,750     4,088       535    22,614       295    22,886       862     69,175
56        Woods Hole                       0         1,185    24,202         0     1,287       259       107     1,528    37,921       635     67,124
           Oceanographic
57        California, Irvine               0           227     6,264         0     4,528       364    40,429     2,826    12,421        20     67,079
58        Maryland, Baltimore             44             0       816         0       237       295    63,910         0       604         0     65,906
59        Yeshiva, New York                0             0       540         0         0         0    63,534         0       618         0     64,692
60        Oregon State                15,692         2,031     8,062         0       568     5,041     7,463     4,542    14,847     2,749     60,995
61        California, Santa              275            47    17,067         0     4,410       407     5,396     4,327    26,186     1,622     59,737
           Barbara
62        North Carolina              11,586         1,280    11,180       944     2,743     3,479     6,815     1,684    16,346     3,288     59,345
           State, Raleigh
63        Texas A&M                   12,871         1,612     5,544         0     2,659       590    15,027     3,203    13,112     1,111     55,729
64        Virginia Polytech            7,405           139     7,575         0    22,961       154     2,077     3,584     9,332     1,380     54,607
           Institute and State
           University
65        City University of               0             0         0     1,028       110         0    52,559       609        97         0     54,403
           New York, Mt. Sinai
           School of Medicine
66        Colorado State               8,351           896     6,689         0     2,863       758    18,180     2,566    11,068     2,523     53,894
67        Louisiana State              5,767         1,320     5,518         0     2,422     4,814    23,880     2,355     3,091     2,509     51,676
68        Illinois, Chicago              205             0     2,627     1,450       770       230    37,794       378     7,974         0     51,428
69        Cincinnati                       0             0     2,745       151       508     3,976    39,406     1,103     3,297         0     51,186
70        Texas Health Center,             0             0       341         0         0         0    49,049       424       533         0     50,347
           San Antonio
71        New Mexico                      36             0    18,061         0       737       220    21,909     3,082     5,603       384     50,032
72        Wake Forest                    222             0        49         0         0       107    47,914        80     1,113         0     49,485
73        Texas Health Center,           286             0       120         0         0       550    46,882       352       135         0     48,325
           Houston
74        Oregon Health                    0             0         0         0     4,893       120    42,476       250       351         0     48,090
           Sciences
75        Kentucky                     6,070            70       699       307     5,209       159    26,872       233     7,757       609     47,985
76        Thomas Jefferson                 0             0       238       373       120       110    46,626         0       376         0     47,843
77        Hawaii, Manoa                4,011             0     6,238         0       256         0    15,614     6,458    14,035     1,097     47,709
78        Wayne State                      0            39     1,484       481       716       278    40,575       426     3,238         0     47,237
79        Connecticut                  1,896         3,064     2,525         0       815         0    31,901       180     6,109       424     46,914
80        Medicine and                   536             0        40       150         0       559    43,018       562       777       425     46,067
           Dentistry, New
           Jersey
81        Texas, MD Anderson               0             0        50         0         0         0    45,238         0       169         0     45,457
           Cancer
82        Virginia                       205             0       596     1,812       235       101    40,646        80     1,260        40     44,975
           Commonwealth
83        Rockefeller                      0             0       465         0     1,029         0    39,904        40     1,264         0     42,702
84        Brown                            0            51     8,637         0     2,441         0    16,777     1,815    12,157       187     42,065
85        Iowa State                  13,566         1,211     1,473         0     6,258     2,274     6,638     1,018     6,286     3,112     41,836
86        Georgia                     10,713           696     1,149       400     3,243     1,288    13,263        67     6,176     4,239     41,234
87        Massachusetts,               3,147           135    13,124         0     1,483       651     5,573     2,381    14,281       341     41,116
           Amherst
88        Dartmouth College              218           410     2,123       252       658       130    31,772     1,140     3,981         0     40,684
89        Kansas                           0             0     1,097     1,477       384       428    28,125       459     6,493       314     38,777
90        Florida State                    0         1,466     1,457         0     6,422        54     4,395     1,709    20,102     2,025     37,630
91        Tulane                          50             4       655         0    12,520       267    22,740       251       953         0     37,440
92        Utah State                   5,374            54    21,563       121       158       492     2,976     3,128     2,723       449     37,038
93        Massachusetts,                   0             0       807         0         0         0    34,515       371       851         0     36,544
           Worcester
94        Texas, Medical                   0             0     1,495         0       465       115    33,709       190       371         0     36,345
           Branch Galveston
95        New Mexico State             3,277             0     4,188         0     4,084       375     1,303    19,692     2,127       634     35,680
96        State University of            350             0     1,865         0        35         0    24,119       677     4,195     3,002     34,243
           New York, Buffalo
97        Vermont                      4,388             0       699       700       534         0    24,323        44     3,153        49     33,890
98        Arizona State, Main            478            25     9,086         0     1,383     2,681     6,734     2,876     9,649         0     32,912
99        Tufts                          231             0     1,435         0       995       357    27,738       119     2,020         0     32,895
100       Missouri, Columbia           9,729             0     1,092       745     1,186       174    14,247       739     3,516       545     31,973
=====================================================================================================================================================
          Total                     $271,442       $62,504  $1,316,1   $42,021  $475,171   $94,862  $5,801,2  $519,821  $1,312,8  $117,596  $10,013,6
                                                                  84                                      60                  22                   83
-----------------------------------------------------------------------------------------------------------------------------------------------------
Source:  NSF. 


ESTIMATED FEDERAL FUNDING TO
UNIVERSITIES FOR RESEARCH AND
DEVELOPMENT, BY DEPARTMENT AND
AGENCY, FISCAL YEAR 1995
========================================================= Appendix III

                         (Dollars in millions)

                                                     Percent of total
                                                     federal funding
                                                    ------------------
Department/agency                           Amount
----------------------------------------  --------  --------  --------
Department of Agriculture
----------------------------------------------------------------------
Agriculture Research Service                 $29.5       0.2
Animal and Plant Health Inspection             1.2        \a
 Service
Cooperative State Research Service           378.2       3.1
Economic Research Service                      2.1        \a
Forest Service                                19.5       0.2
Foreign Agriculture Service                    0.4        \a
National Agricultural Statistics Service       0.2        \a
Rural Business and Cooperative                 1.1        \a
 Development Service
======================================================================
Total Department of Agriculture             $432.2                 3.6

Department of Commerce
----------------------------------------------------------------------
Economic Development Administration           $0.1        \a
National Institute of Standards and           15.6       0.1
 Technology
National Oceanic and Atmospheric              78.9       0.7
 Administration
======================================================================
Total Department of Commerce                 $94.6                 0.8

Department of Defense
----------------------------------------------------------------------
Army                                        $237.6       2.0
Navy                                         459.1       3.8
Air Force                                    226.9       1.9
Advanced Research Projects Agency            298.8       2.5
Ballistic Missile Defense Organization        59.4       0.5
Defense Information Systems Agency             1.0        \a
Defense Logistics Agency                       6.5        \a
Defense Mapping Agency                         1.0        \a
Defense Nuclear Agency                         1.3        \a
Washington Headquarters Services             385.1       3.2
======================================================================
Total Department of Defense               $1,676.7                13.9
======================================================================
Total Department of Education               $112.4                 0.9
======================================================================
Total Department of Energy                  $617.4                 5.1

Department of Health and Human Services
----------------------------------------------------------------------
Administration on Aging                       $4.1        \a
Administration for Children and Families      10.3        \a
Agency or Health Care Policy and              59.3       0.5
 Research
Centers for Disease Control and               31.4       0.3
 Prevention
Food and Drug Administration                  12.0        \a
Health Care Financing Administration          10.3        \a
Health Resources and Services                 12.1        \a
 Administration
National Institutes of Health              6,342.3      52.4
Office of the Assistant Secretary for          0.3        \a
 Health
Office of the Secretary                        3.2        \a
Social Security Administration                  .7        \a
======================================================================
Total Department of Health and Human      $6,486.0                53.6
 Services
======================================================================
Total Department of Housing and Urban         $0.9                  \a
 Development
Department of the Interior
Bureau of Mines                               $6.7        \a
Bureau of Reclamation                          0.1        \a
Geological Survey                             17.3       0.1
Minerals Management Service                    8.7        \a
National Biological Survey                    13.9       0.1
National Park Service                         10.5        \a
======================================================================
Total Department of the Interior             $57.2                 0.5
======================================================================
Total Department of Justice, Office of        $5.1                  \a
 Justice Programs

Department of Labor
----------------------------------------------------------------------
Bureau of Labor Statistics                    $9.3        \a
Employment and Training Administration         0.7        \a
Office of the Secretary                        0.1        \a
======================================================================
Total Department of Labor                    $10.1                  \a

Department of Transportation
----------------------------------------------------------------------
Coast Guard                                   $0.5        \a
Federal Aviation Administration               20.4       0.2
Federal Highway Administration                36.8       0.3
Federal Railroad Administration                0.2        \a
Federal Transit Administration                 3.4        \a
Maritime Administration                        0.2        \a
National Highway Traffic Safety                6.0        \a
 Administration
======================================================================
Total Department of Transportation           $67.5                 0.6
======================================================================
Total Department of the Treasury, Bureau      $1.7                  \a
 of Engraving and Printing
======================================================================
Total Department of Veterans Affairs          $2.8                  \a

Other agencies
----------------------------------------------------------------------
Agency for International Development         $20.8       0.2
Appalachian Regional Commission                0.5        \a
Environmental Protection Agency               97.4       0.8
National Aeronautics and Space               652.0       5.4
 Administration
National Science Foundation                1,762.7      14.6
Nuclear Regulatory Commission                  4.7        \a
======================================================================
Total other agencies                      $2,538.1                21.0
======================================================================
Total all departments and agencies\       $12,102.               100.0
                                                 7
----------------------------------------------------------------------
\a Less than 0.1 percent

Source:  NSF. 


FEDERAL FUNDING TO FFRDCS
ADMINISTERED BY UNIVERSITIES FOR
SCIENCE AND ENGINEERING RESEARCH
AND DEVELOPMENT IN FISCAL YEAR
1995
========================================================== Appendix IV

                                                         Award amounts
                                Administering              (dollars in
FFRDC                           university                  thousands)
------------------------------  ------------------  ------------------
National Optical Astronomy      Association of                 $29.099
 Observations                    Universities for
                                 Research in
                                 Astronomy, Inc.
Lawrence Berkeley National      University of                  174,707
 Laboratory                      California
Jet Propulsion Laboratory       California                   1,031,706
                                 Institute of
                                 Technology
Lawrence Livermore National     University of                  482,027
 Laboratory                      California
Stanford Linear Accelerator     Stanford                       117,713
 Center                          University
National Center for             University
 Atmospheric Research            Corporation for                65,689
                                 Atmospheric
                                 Research
Argonne National Laboratory     University of                  252,074
                                 Chicago
Fermi National Accelerator      Universities                   170,917
 Laboratory                      Research
                                 Association, Inc.
Ames Laboratory                 Iowa State                      21,845
                                 University
Lincoln Laboratory              Massachusetts                  314,239
                                 Institute of
                                 Technology
Princeton Plasma Physics        Princeton                      115,284
 Laboratory                      University
Los Alamos National Laboratory  University of                  523,196
                                 California
Brookhaven National Laboratory  Associated                     203,535
                                 Universities,
                                 Inc.
Software Engineering Institute  Carnegie Mellon                 31,582
                                 University
Oak Ridge Institute for         Oak Ridge                       17,176
 Science and Education           Associated
                                 Universities,
                                 Inc.
Thomas Jefferson National       Southeastern
 Accelerator Facility            Universities                   59,031
                                 Research
                                 Association, Inc.
National Radio Astronomy        Associated                      29,597
 Observatory                     Universities,
                                 Inc.
National Astronomy and          Cornell University               7,669
 Ionosphere Center
======================================================================
Total                                                       $3,647,086
----------------------------------------------------------------------
Source:  NSF. 


FEDERAL AGENCIES' PROGRAMS FOR
ADMINISTERING BAYH-DOLE FUNDING
=========================================================== Appendix V


   DEPARTMENT OF HEALTH AND HUMAN
   SERVICES
--------------------------------------------------------- Appendix V:1

Within HHS, we reviewed only the extramural inventions programs of
NIH.  NIH is the largest federal provider of direct funding for
research and development, accounting for 97.8 percent of HHS'
estimated obligations for research and development for fiscal year
1995. 

The Division of Extramural Invention Reports within NIH is
responsible for overseeing the federal regulations promulgated by the
Department of Commerce concerning Bayh-Dole reporting for extramural
programs.  In order to carry out its oversight responsibilities, NIH
has required that grantees and contractors submit various
documentation, including copies of the invention disclosure and
election of title.  NIH has also required grantees and contractors to
submit copies of the patent application, issued patent, and
nonexclusive government license, although these documents are not
specifically required by the regulations.  As of October 23, 1992,
NIH also began requesting that grantees and contractors submit annual
utilization reports. 

According to an NIH official, NIH deployed Edison, an on-line system
for invention reporting, in October 1995.  While some of the
information that NIH receives from grantees and contractors can now
be transmitted electronically, NIH still requires three pieces of
documentation in hard-copy form.  These include the invention
disclosure form, the confirmatory license, and the portion of the
patent application containing the government support clause. 

NIH does not require that grantees and contractors certify that they
have complied with royalty distribution requirements or made efforts
to give licensing preference to U.S.  industry and small businesses. 
The regulations do not specify how these royalty distributions should
be documented.  However, NIH officials said they had not received any
serious complaints about royalty payments.  NIH has also not received
any complaints that small businesses were not being given preference
in manufacturing inventions resulting from federally funded research
or that such inventions were not being manufactured substantially
within the United States. 

NIH has received one request that it invoke the march-in procedures
under the Bayh-Dole Act.  In March 1996, a company called Cellpro,
Inc., asserted that march-in was necessary to alleviate health needs. 
A Federal District Court found that the stem cell separation device
developed by Cellpro infringed on patents owned by Johns Hopkins
University and licensed to another company.  The court had issued an
order in the case allowing Cellpro to keep its product on the market
until an alternative was approved by the Food and Drug Administration
and made available for sale.  The case currently is under appeal.  In
August 1997, NIH concluded that the initiation of march-in procedures
was not warranted but that it would continue to monitor the situation
until a comparable alternative product became available for sale in
the United States.  NIH has declared exceptional circumstances and
retained the rights to a patent in about six or fewer cases. 


   DEPARTMENT OF DEFENSE
--------------------------------------------------------- Appendix V:2

DOD does not have a centralized office monitoring Bayh-Dole.  Rather,
each of the military services, as well as some of the other defense
agencies, has separate offices, and even these may be decentralized. 
We identified at least seven DOD organizations that are responsible
for implementing the act.  While the Navy has at least two
organizations that are responsible for Bayh-Dole, the bulk of Navy
research funding subject to Bayh-Dole is from the Office of Naval
Research (ONR).  The Army has at least three organizations that are
responsible for inventions resulting from Bayh-Dole R&D, and the Air
Force has at least two. 

ONR is taking steps to participate in Edison, working on the software
programming necessary to interface with Edison's Internet web site. 
NIH is developing a screen format to display DOD-specific data.  Once
ONR is on Edison, the Army and Air Force can easily join Edison. 
Participation in Edison would give DOD a central Bayh-Dole monitoring
and reporting capability. 


   NATIONAL SCIENCE FOUNDATION
--------------------------------------------------------- Appendix V:3

Bayh-Dole is administered within NSF by the Office of General
Counsel.  NSF officials said that Bayh-Dole is self-regulating in
that it is left to the universities to determine whether they wish to
retain title to and commercialize their federally funded inventions. 

NSF does very little monitoring of Bayh-Dole, recording information
received from the universities on a computerized spreadsheet.  NSF is
in the process of developing a new grants-tracking system called
FastLane.  One component of this system is the Project Reporting
System, which would allow--among other things--universities to
provide information on activities involving inventions on-line via
the Internet. 


   DEPARTMENT OF ENERGY
--------------------------------------------------------- Appendix V:4

DOE field offices located in Chicago, Illinois, and Oakland,
California, administer research contracts and grants with
universities and thus handle all Bayh-Dole reporting.  Of these two
offices, Chicago handles the vast majority--about 90 percent--of the
activity. 

DOE's computer system tracks activities involving inventions and
ensures that the universities are exercising their right to elect
title to inventions.  In this connection, the computer will generate
a letter that goes out 60 days prior to the end of the 2-year
election period to ensure that DOE is preserving its own rights in
case the university does not elect to retain title.  DOE also
verifies that the universities issue the confirmatory licenses and
files them with the Patent and Trademark Office (PTO), although DOE
officials said they may be as far as 2 years behind in filing
licenses. 

DOE does not use NIH's Edison system, viewing it as not very
comprehensive and lacking in security because it uses the Internet. 
DOE uses its own computer system to track a broad array of data on
its 7,000 to 8,000 contractors, only a portion of which are subject
to the provisions of the Bayh-Dole Act. 


   NATIONAL AERONAUTICS AND SPACE
   ADMINISTRATION
--------------------------------------------------------- Appendix V:5

NASA has 10 field centers that manage contracts and grants.  Each
center has a patent attorney assigned to it as well as a
commercialization office that can become involved in the Bayh-Dole
reporting process.  Universities report their inventions to the
appropriate centers, which then handle all subsequent contacts with
the universities. 

NASA has a computer system to track activities involving inventions
because the agency generates inventions not only through universities
but also through contractors, grants with other nonprofit research
institutions, and in its own facilities.  This system, known as
TechTracS, automatically generates letters to grantees and
contractors setting out requirements for Bayh-Dole reporting.  In
addition, the system provides sample format letters for use in the
reporting process and will notify the universities when the 2-year
reporting date is nearing. 

According to NASA officials, the universities send the confirmatory
licenses to the NASA centers, which then send them to NASA
headquarters.  Subsequently, NASA files the confirmatory licenses
with the PTO within several months of receipt. 


   DEPARTMENT OF AGRICULTURE
--------------------------------------------------------- Appendix V:6

The Cooperative State Research, Education and Extension Service
(CSREES) has the responsibility for administering the Bayh-Dole Act
within USDA.  CSREES does no monitoring and, until recently, has had
no computerized database following Bayh-Dole activities.  Thus, while
CSREES keeps records of the information the universities submit, USDA
officials said they have little idea of the level of activity or
whether the universities are complying with the act's requirements,
such as making disclosures, electing title, or submitting
confirmatory licenses.  USDA officials believe that the number of
federally funded inventions created by universities receiving USDA
research funds is small, probably no more than 100 a year. 

USDA will begin using NIH's Edison system in mid-1998, and USDA
officials believe this action will allow them to improve their
tracking capabilities in the future. 


   ENVIRONMENTAL PROTECTION AGENCY
--------------------------------------------------------- Appendix V:7

According to officials from EPA, few inventions--probably no more
that 10 or so a year--are coming out of universities and thus subject
to the Bayh-Dole Act.  For this reason, no separate office or unit
monitors the agency's R&D activities among universities; rather, any
Bayh-Dole reporting is handled by Patent Counsel in EPA's Office of
General Counsel.  EPA does no monitoring of universities' Bayh-Dole
activities and maintains no special inventions database.  EPA is
considering using NIH's Edison system. 


   DEPARTMENT OF COMMERCE
--------------------------------------------------------- Appendix V:8

The Department of Commerce is involved in Bayh-Dole on two levels. 
The agency is responsible for overall coordination of certain
activities governmentwide and is also the eighth largest agency in
providing federal funding for science and engineering research and
development.  According to Commerce officials, Commerce largely
limits its coordination role to one of encouragement and providing
assistance if requested.  It does not maintain an overall database
nor does it monitor the activities of the funding agencies.  Commerce
carries out its coordination role through the Office of Technology
Policy. 

According to Commerce officials, Commerce does not have a centralized
office for monitoring Bayh-Dole activities for the research programs
it sponsors, except that most inventions are reported to and docketed
by Patent Counsel for the Department of Commerce.  Rather, such
monitoring is carried out by the organization actually receiving the
research funds.  In this connection, organizations such as the
National Oceanic and Atmospheric Administration and the National
Institute of Standards and Technology monitor their own funds.  We
did not review the activities of any of these organizations. 


IMPLEMENTING BAYH-DOLE AT JOHNS
HOPKINS UNIVERSITY
========================================================== Appendix VI


   FEDERAL RESEARCH
-------------------------------------------------------- Appendix VI:1

According to NSF, Johns Hopkins University (JHU) received $569.3
million in federal funds for science and engineering research in
fiscal year 1995, ranking it first nationwide.  The bulk of this
funding came from DOD, with $288.9 million in awards, and HHS, with
$241.7 million.  According to information provided by JHU, federal
funding accounted for 86.5 percent of the university's overall
research budget for its fiscal year 1996, which ended June 30, 1996. 

The Applied Physics Laboratory (APL) is a division of JHU and, in the
university's fiscal year 1996, received about 50 percent of JHU's
federal research funds and about 45 percent of all JHU research
funds.  About 99 percent of APL's research funding is from the
federal government. 


   TECHNOLOGY TRANSFER UNIT
-------------------------------------------------------- Appendix VI:2

JHU has a decentralized technology transfer program with three units
responsible for Bayh-Dole implementation.  The JHU School of
Medicine's Office of Technology Licensing (OTL) is responsible for
inventions from the School of Medicine.  APL's Office of Patent
Counsel handles the disclosure and marketing of inventions arising
from APL's research.  The Homewood Campus Office of Technology
Transfer (OTT) is responsible for inventions from the remainder of
JHU.  Each office has its own staff, policies, procedures, and forms. 


   REPORTING INVENTIONS
-------------------------------------------------------- Appendix VI:3

Each of the three JHU technology transfer offices publishes its own
intellectual property policy, and these policies include a
requirement for researchers to report inventions to JHU.  Technology
transfer personnel are aware of Bayh-Dole requirements; however, the
technology transfer offices have no written internal procedures to
accomplish Bayh-Dole reporting and other requirements. 

All three of JHU's technology transfer offices have separate,
automated intellectual property databases.  APL has customized
software to track patent and licensing activities and is on a local
area network connecting the Office of Patent Counsel staff.  OTL's
automated database contains basic information on the invention to
include licensing income and expenses.  OTT's automated database
tracks disclosure and patent activity.  OTT is working to include
modules for tracking financial, licensing, and marketing activity. 


   LICENSING INVENTIONS
-------------------------------------------------------- Appendix VI:4

All of JHU's technology transfer offices consider inventors to be the
best resources for identifying potential licensees.  Researchers have
industry contacts developed from working with industry on research
and from raising research grant funds.  In some cases, the disclosure
forms require the inventor to provide the names of companies that may
be interested in the technology.  At APL, the inventor is included in
a committee that provides licensing negotiations oversight. 

JHU has no formal mechanism for ensuring that small businesses
receive priority in licensing.  However, JHU personnel were aware of
the Bayh-Dole requirement to give priority to small businesses.  JHU
personnel stated that there is little competition for most inventions
and that most licenses go to small businesses.  In the university's
fiscal year 1996, 73.9 percent of JHU licenses or license options
were issued to small businesses. 

Each of JHU's technology transfer offices has its own distribution
formula for royalty income.  As seen in table VI.1, OTT and OTL use a
sliding scale to distribute the income. 



                                        Table VI.1
                         
                         Royalty Distribution Formula for OTL and
                                           OTT

                                    Percent royalty distribution
           ------------------------------------------------------------------------------
                             Inventors'      Inventors'
             Inventors       laboratory      department        School        University
---------  --------------  --------------  --------------  --------------  --------------
Annual
net
income        OTL     OTT     OTL     OTT     OTL     OTT     OTL     OTT     OTL     OTT
---------  ------  ------  ------  ------  ------  ------  ------  ------  ------  ------
First          35      35      30      30      10      10      23      23       2       2
 $100
 thousand
To $300        30      30      30      30      10      10      25      25       5       5
 thousand
To $1          20      30      15      25      10      10      45      25      10      10
 million
Over $1                15              25              10              40              10
 million
$1             15              10              15              50              10
 million
 to $3
 million
Over $3         5               5               5              75              10
 million
-----------------------------------------------------------------------------------------
Source:  JHU. 

For APL, a sole inventor receives one-third of the net income up to
$20,000.  After the $20,000 level is reached, the inventor receives
10 percent of the net income.  If there are co-inventors, they share
equally one-third of the net income up to $20,000.  After this point,
the inventors share equally 10 percent of the net income.  The JHU
President's Discretion Fund receives 10 percent of the net income,
and the APL Development Fund receives the remainder of net income
after the other distributions. 


   BAYH-DOLE'S IMPACT
-------------------------------------------------------- Appendix VI:5

According to data provided to AUTM, JHU received 194 invention
disclosures, executed 46 new licenses or options, applied for 74 new
U.S.  patents, and was issued 24 U.S.  patents during the
university's fiscal year 1996.  At the end of fiscal year 1996, JHU
had 233 active licensing agreements, 100 (42.9 percent) of which were
producing licensing income.  Licensing income in the university's
fiscal year 1996 totaled $3.1 million.  For the university's fiscal
years 1995 and 1996, JHU's School of Medicine received 60.9 percent
of its royalty revenue from inventions supported by federal research
funds.  For the period 1991 through 1996, JHU's APL received 25.7
percent of its royalty revenue from inventions supported by federal
research funds. 

According to JHU personnel, JHU does not have the royalty income
comparable to many universities of its size and influence.  Most
universities get a least three-fourths of their royalty income from
one or two inventions, but JHU officials said they have not had a
"big hit" yet. 


IMPLEMENTING BAYH-DOLE AT THE
UNIVERSITY OF WASHINGTON
========================================================= Appendix VII


   FEDERAL RESEARCH
------------------------------------------------------- Appendix VII:1

The University of Washington (UW) received $299.6 million in federal
funds for engineering and science research in fiscal year 1995,
according to NSF, ranking it second among universities nationwide. 
Of this amount, $193.1 million, or about 64 percent, came from HHS. 
Most of the remainder came from NSF ($35 million), DOD ($32 million),
and DOE ($15 million). 

UW officials said UW is not responsible for any research activities
at affiliate organizations that receive separate funding.  UW's
Applied Physics Laboratory receives funding from the Navy, but since
the laboratory is part of the university, the funds are channeled
through the university.  Likewise, funding for the two hospitals
owned by UW is channeled through the university. 


   TECHNOLOGY TRANSFER UNIT
------------------------------------------------------- Appendix VII:2

Established in 1983, UW's Office of Technology Transfer (OTT) is
responsible for administering UW's intellectual property policies and
for coordinating technology transfer.  Located within UW's Office of
Research, OTT is responsible for ensuring that innovations developed
at UW achieve their full potential to benefit the public and the
academic community.  OTT is organized into (1) the Health Science
Sector, (2) the Science-Engineering-Arts Technologies Sector, and (3)
the Software Sector.  The chief functions of OTT are

  -- protecting inventions and other intellectual property developed
     by faculty, staff, employees, and students through patents,
     copyrights, and trademarks;

  -- assessing the commercial potential of these innovations and
     licensing suitable technologies to companies that can
     successfully commercialize them;

  -- providing a responsive resource to campus inventors; and

  -- using technology transfer as a means to advance mutually
     beneficial relationships between UW and private industry. 


   REPORTING INVENTIONS
------------------------------------------------------- Appendix VII:3

As a condition of employment, all UW employees agree to assign
inventions made in the normal course of their work to the university. 
Inventors are required to disclose promptly all potential inventions
to OTT, which reports all disclosures for federally funded inventions
to the respective funding agencies.  Researchers complete a
disclosure form supplied by OTT describing the innovation and its
funding sources. 

When OTT receives the disclosure forms, a technology manger reviews
them with the researcher to learn the developmental history of the
invention, to identify any publications describing the invention, and
to clarify the inventive contributions of those involved.  OTT may
decide to file a patent application, obtain financial support for
further development, negotiate licenses, or waive its rights to the
invention.  If OTT does not elect title to an invention or chooses
not to file or to continue a patent application, it promptly offers
title or rights back to the sponsoring federal agency.  According to
the OTT Director, UW will elect to retain title to an invention if it
will either be "revenue producing" or "revenue neutral." Generally,
OTT files a patent application whenever it believes patent costs can
be recovered. 

The entire invention reporting process is tracked through both a
document system and a custom-designed computer database containing
standard letters and forms used in the reporting process.  According
to UW officials, OTT does not currently use the National Institutes
of Health's Edison system because it is not compatible with UW's
computer system and does not meet OTT's criteria for replacing the
system. 


   LICENSING INVENTIONS
------------------------------------------------------- Appendix VII:4

At present, OTT performs all licensing activities for inventions made
by UW researchers.  Prior to 1995, the Washington Research Foundation
(WRF) also negotiated and managed licensing agreements for inventions
developed by UW researchers.  WRF is a private, nonprofit
organization serving research institutions in the state.  While WRF
continues to manage all of the active license agreements for UW
inventions, it does not negotiate any new ones.  Instead, its current
role is to evaluate whether UW inventions have the potential for
forming a start-up company.  UW made the decision to stop using WRF
to license its inventions because it believed a more comprehensive
service approach was needed. 

In seeking licensing arrangements, OTT technology managers work with
inventors to determine who may be interested in the invention.  OTT
has no specific procedures for ensuring that small businesses receive
preference in the licensing process and does not keep statistics on
the number of license agreements with small businesses.  According to
the Director, there is seldom any competition in the licensing
process, and the majority of the licenses are with small businesses. 
Licensing agreements for inventions that were federally funded
contain a clause which specifies that the agreement is subject to all
of the requirements contained in the Bayh-Dole Act and implementing
regulations. 

UW shares royalty income on inventions with the inventors, the
schools and departments sponsoring the research, and other research
programs.  The direct costs of obtaining the patent(s) must be
recovered in addition to a 15-percent service fee before the
distribution of royalty income begins.  The remainder of the income
will be distributed as shown in table VII.1. 



                              Table VII.1
                
                Royalty Income Distribution Schedule for
                      the University of Washington

                                   Percent of distribution share
                              ----------------------------------------
                                              Inventor's    University
Cumulative                                   department/      research
net income                        Inventor       college         funds
----------------------------  ------------  ------------  ------------
First $10,000                          100
$10,000 -$40,000                        50            25            25
Above $40,000                           30            20            50
----------------------------------------------------------------------
Source:  The University of Washington. 


   BAYH-DOLE'S IMPACT
------------------------------------------------------- Appendix VII:5

During UW's fiscal year 1996, it received 233 invention disclosures,
97 of which were federally funded.  UW elected to retain title to 12
federally funded inventions and signed 44 license agreements during
the year.  Excluding recovery of legal costs, UW received $784,000 in
royalties for federally funded inventions and $1.4 million for other
inventions.  WRF provided UW with royalty income of $223,000 for
federally funded inventions and $3.5 million for other inventions. 

Two inventions, known as the Hall technologies, are largely
responsible for the amount of royalties received from the
commercialization of inventions at UW.  One of these technologies was
a Hepatitis B vaccine, and the other was a method of using yeast to
produce interferon, a cancer treatment drug.  According to the OTT
Director, these two inventions would have accounted for 80 percent of
UW's licensing revenue 3 years ago.  This is no longer true because
many successful start-up companies have been formed.  The Director
estimated that 25 to 40 of UW's estimated 200 active license
agreements are with start-up companies. 


IMPLEMENTING BAYH-DOLE AT THE
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
======================================================== Appendix VIII


   FEDERAL RESEARCH
------------------------------------------------------ Appendix VIII:1

According to NSF, the Massachusetts Institute of Technology (MIT)
ranks third overall in the nation in the receipt of federal science
and engineering R&D funding, with $282.1 million in fiscal year 1995. 
DOD and DOE were the largest contributors of federal research
funding, with each providing $68.2 million.  HHS was also a
significant source of funding, awarding the university $51.5 million. 
MIT also manages Lincoln Laboratory, an FFRDC, which received a total
of $314.2 million in federal research funds from DOD and the
Department of the Interior in fiscal year 1995. 


   TECHNOLOGY TRANSFER UNIT
------------------------------------------------------ Appendix VIII:2

Established in 1940, the Technology Licensing Office (TLO) is the
only office at MIT that reports, patents, and licenses inventions
developed by faculty and staff at MIT and Lincoln Laboratory.  TLO
also conducts licensing activities for inventions arising from work
administered by the Whitehead Institute, a biomedical research
institute that is affiliated with MIT.  TLO does not review
Whitehead's invention disclosures or decide whether or not to apply
for patents on these inventions. 

TLO's goals are to facilitate the transfer to public use and benefit
of MIT-developed technology and to provide an additional source of
unrestricted income to support research and education at MIT. 
However, research has priority over technology development, and TLO
will work with the MIT developers of technology and industry only if
such work does not interfere with the normal flow of technical and
academic information through publications, conferences, and
consulting. 


   REPORTING INVENTIONS
------------------------------------------------------ Appendix VIII:3

MIT employees are obligated to disclose to TLO any intellectual
property developed or discovered at MIT, which is made under a grant
or contract to MIT or which make significant use of MIT's facilities
or funds.  TLO assigns each invention disclosure a case number and,
for inventions that were federally funded, informs the appropriate
federal agency that an invention disclosure has been received.  If
TLO decides to apply for a patent, TLO references the patent
application in its electronic database to the case number and informs
the appropriate federal agency that it has either filed or will soon
file a patent application.  When the application is actually filed,
TLO provides a copy of the application, together with a confirmatory
license, to the appropriate federal agency.  If TLO decides not to
file a patent application, it informs the appropriate federal agency
and the inventor that it has not elected title to the invention.  The
inventor may then petition the federal agency for a release of patent
rights to himself. 

TLO has a custom-designed intellectual property database and has
elected not to use the Edison system to report inventions to NIH. 
According to the TLO's Intellectual Property Counsel, Edison is not
compatible with TLO's database, does not track the data TLO needs,
and does not allow full compliance with federal reporting
requirements. 


   LICENSING INVENTIONS
------------------------------------------------------ Appendix VIII:4

Once a disclosure form is submitted to TLO, the inventor typically
meets with the assigned licensing officer as a first step in
evaluating the invention.  Researchers are often the best source of
leads to identify companies interested in the new technology. 
According to TLO's Director, researchers decide they want to form
start-up companies about 10 percent of the time.  This decision
results in 8 to 10 start-up companies being formed each year.  MIT
sometimes accepts equity in these companies in lieu of royalty
payments.  The Director said that TLO licenses inventions to the
companies best suited to commercialize them.  Most inventions are
licensed to small companies because they tend to be more willing to
invest in new technology.  As of December 1997, 275 of 491 active
patent and copyright licenses were with small entities, while the
remaining 216 were with large entities.  License agreements for
inventions that were federally funded are to contain a clause
requiring that licensed products leased or sold in the United States
be substantially manufactured in the United States. 

The royalty income received for a technology license is distributed
on an annual basis.  Fifteen percent is deducted from gross royalty
income to cover the expenses of TLO.  Out-of pocket costs, such as
patent filing, are then deducted to arrive at adjusted royalty
income.  Inventors receive one-third of the adjusted royalty income. 
The difference between 15 percent and the actual pro-rata cost of
operating the TLO is deducted or added to the remaining adjusted
royalty income.  Out-of pocket expenses for unmarketable patents are
then deducted to arrive at the net royalty income, which is shared
equally by MIT's general fund and the inventor's laboratory or
department. 


   BAYH-DOLE'S IMPACT
------------------------------------------------------ Appendix VIII:5

During MIT's fiscal year 1996, which ended on June 30, 1996, MIT
received 323 invention disclosures, of which 166 were for federally
funded inventions.  MIT elected to retain title to 77 federally
funded inventions.  MIT signed 68 license and option agreements
during fiscal year 1996.\1 According to AUTM, MIT ranked eighth among
universities nationwide in license income received from inventions
during fiscal year 1996--a total of $10.1 million.  MIT could not
determine what percent of this income was derived from federally
funded inventions.  According to TLO's Director, about 90 percent of
the money MIT receives in licensing royalties each year comes from
about 10 percent of its licenses.  In fiscal year 1996, the
commercialization of the public key encryption method, which was
developed under grants from the Navy and NSF, resulted in $271,875 in
royalties to MIT.  MIT received an additional $91,679 in royalties
from the commercialization of the arrhythmia prediction diagnostic
technology, which was developed with funding from various federal
agencies. 


--------------------
\1 This figure includes inventions made at the Whitehead Institute. 


IMPLEMENTING BAYH-DOLE AT STANFORD
UNIVERSITY
========================================================== Appendix IX


   FEDERAL RESEARCH
-------------------------------------------------------- Appendix IX:1

According to NSF, Stanford University received $266.7 million in
federal funds for science and engineering research in fiscal year
1995, ranking fourth nationwide.  The bulk of this funding came from
HHS, with $128.9 million in awards, and NASA, with $56.7 million. 
According to information provided by Stanford, federal funding
accounted for 85.2 percent of the university's overall research
budget for its fiscal year 1996, which ended August 31, 1996. 

Stanford operates the Stanford Linear Accelerator Center under
contract with DOE.  This facility investigates the structure of
matter at the atomic level with X-rays and at much smaller scale with
electron and positron beams. 


   TECHNOLOGY TRANSFER UNIT
-------------------------------------------------------- Appendix IX:2

Since 1970, Stanford University's Office of Technology Licensing
(OTL) has been the universitywide office designated to promote
technology transfer.  OTL is responsible for all patenting and
licensing activities.  OTL's mission is to promote the transfer of
technology for public benefit while generating income to support
research and education. 


   REPORTING INVENTIONS
-------------------------------------------------------- Appendix IX:3

Stanford researchers are required to disclose to OTL all inventions
made in the course of their university responsibilities or with more
than incidental use of the university's resources.  OTL personnel are
then to review the invention and forward copies of the disclosures to
all the relevant federal funding agencies as required.  Stanford
sends the funding agencies copies of (1) the election letter, (2) the
patent application, (3) the confirmatory license, (4) assignments,
and (5) the patent when issued. 

About 2 years ago, OTL automated its operations using a customized
system that contains information on all aspects of technology
transfer actions, including licensing and patent activity; data prior
to this time are not available in automated form.  The current
automated system does not provide a suspense function to
automatically track Bayh-Dole reporting dates and other deadlines. 
However, OTL has given its highest priority to efforts to modify the
automated system software to provide suspense or tickler capability. 


   LICENSING INVENTIONS
-------------------------------------------------------- Appendix IX:4

OTL licensing associates are to review each invention disclosure and
evaluate the invention for commercial value.  As part of this
process, the associates discuss the invention and its possible
application with the inventor and obtain an opinion from a patent
attorney on the patentability of the invention.  Although it is often
difficult to predict which inventions will become commercially
viable, generally OTL would like to focus on inventions that have a
potential of generating at least $100,000 per year in royalty income. 

Inventors often are aware of companies that might successfully
commercialize their inventions, and the associates are to work
closely with the inventors to identify potential licensees. 
Associates market inventions by (1) sending mailings to selected
companies, (2) calling contacts in industry, (3) listing available
technologies on the Internet, (4) attending professional meetings,
and (5) sending updates of new disclosures to industrial affiliate
groups. 

OTL has no formal mechanism for ensuring that small businesses get
first opportunity at a license.  However, OTL personnel were aware of
the Bayh-Dole requirement to give priority to small businesses, and
OTL expects its licensing associates to know the licensees'
small-entity status.  Of the 136 licenses for the university's fiscal
year 1996, 109, or 80.1 percent, of these were with small entities. 

After deductions of 15 percent for OTL's expenses and other direct
expenses, royalty income is split evenly between the inventors, the
inventor's department, and the inventor's school.  The 15 percent
deducted from the gross royalty income is used by OTL to pay
operating expenses, and any funds remaining go to the OTL Research
Incentive Fund, managed by the Dean of Research. 


   BAYH-DOLE'S IMPACT
-------------------------------------------------------- Appendix IX:5

For calendar years 1991 through 1996, university staff reported 993
inventions to OTL.  Federal funds were involved in 518 invention
disclosures, or 52.2 percent.  In this same period, federal funding
was involved in 260, or 56.0 percent, of the 464 patent filings and
113, or 56.2 percent, of the 201 patents issued to Stanford.  In
Stanford's fiscal year 1996, OTL executed 136 licenses and had a
total of 903 active licenses in its portfolio. 

According to AUTM, Stanford ranked second among universities
nationwide in license income received from inventions in the
university's fiscal year 1996--a total of $43.8 million.  Of this
amount, the inventions subject to Bayh-Dole accounted for at least
$40.6 million, or 92.7 percent. 

A few successful inventions generate the bulk of Stanford's royalty
revenue.  In the university's fiscal year 1996, one invention
accounted for 72 percent of license royalties.  This invention,
dating back to the 1970s, was for recombinant DNA, and the research
was funded, in part, by NIH and NSF.  Another invention developed by
Stanford and the University of California with NIH funding is
phycobiliproteins, which are used to detect cancerous tumors and for
other screening tests.  This invention earns about $3 million a year
in royalties. 


IMPLEMENTING BAYH-DOLE AT THE
UNIVERSITY OF MICHIGAN
=========================================================== Appendix X


   FEDERAL RESEARCH
--------------------------------------------------------- Appendix X:1

According to NSF, the University of Michigan (UM) ranks fifth overall
in the nation and second among public institutions in the receipt of
federal science and engineering support.  Federal obligations for
science and engineering research and development at UM totaled $243.1
million in fiscal year 1995.  Of this amount, $156.8 million, or
about 64 percent, was provided by HHS.  NSF awarded the university
$29.6 million, while DOD awarded the University $21.6 million. 

According to UM officials, UM is not responsible for any research
activities at affiliate organizations that receive separate funding. 
UM owns a hospital that is staffed by faculty and students from its
medical school. 


   TECHNOLOGY TRANSFER UNIT
--------------------------------------------------------- Appendix X:2

Established in 1982, the Technology Management Office (TMO) is the
only office at UM that reports, patents, and licenses inventions
developed by its faculty and staff.  The medical school has its own
technology office but does not have the authority to sign license
agreements.  The medical school works with TMO in commercializing
inventions developed at the medical school. 

TMO's objectives and intellectual property development activities are
to facilitate the efficient transfer of knowledge and technology from
the university to the private sector in service of the public
interest, to support the discovery of new knowledge and technology
and to attract resources for the support of the university's
programs, to provide services to the university faculty and staff to
facilitate their efforts to carry out the university's mission, and
to promote local and national economic development. 


   REPORTING INVENTIONS
--------------------------------------------------------- Appendix X:3

UM employees are obligated to disclose to TMO (and to the medical
school administration if the inventor is an employee of the medical
school) any intellectual property developed or discovered at UM. 
Invention disclosure forms are available from either the TMO or by
downloading from UM's Internet website.  Following the invention
disclosure, TMO personnel hold a conference with the inventor to
discuss the inventor's expectations, the invention's applications,
and the types of companies that may be interested in licensing the
invention.  According to TMO officials, TMO reports inventions that
received support from the federal government to the respective
funding agency within 60 days.  Also, TMO evaluates each invention as
quickly as possible for potential patenting and licensing. 
Assessment criteria include patentability, commercial viability,
stage of development, and market receptivity.  If there are
assessment questions about commercial attractiveness, the technology
may be evaluated by an internal science committee or reviewers
external to UM.  According to the Business Manager of TMO, the
decision whether to elect title to an invention will depend upon the
likelihood of obtaining a patent and the commercial viability of the
invention.  TMO's goal is to commercialize inventions and assist the
faculty in achieving the technology transfer goals of the university. 

UM has a custom-designed inventions database.  While the system is
adequate for entering and tracking data, according to TMO officials,
it is not capable of analyzing data.  For this reason, TMO has hired
a consultant to make a major revision of the database.  TMO uses the
Edison system to report inventions to NIH.  Information is
transmitted over the Internet because it cannot currently be
downloaded directly from TMO's computer system.  TMO officials said
that the biggest problem with using the Edison system is that the
transmission process is very slow and the user is sometimes locked
out of the system for large increments of time.  However, TMO
personnel stated that they would not object to using Edison if it
totally replaced the current paper reporting system and all federal
agencies used the system. 


   LICENSING INVENTIONS
--------------------------------------------------------- Appendix X:4

The Business Manager of TMO stated that licensing specialists contact
companies that might be interested in the new technology.  New
technologies available for licensing are also reported on UM's
Internet website.  In addition, researchers often produce leads for
marketing their own inventions.  If the research project had a
corporate sponsor, the sponsor usually has the option to license the
technology.  In cases in which TMO has been unsuccessful in marketing
its inventions, it has offered to allow a contractor, Research
Corporation Technologies (RCT), to do so.  However, RCT has not
agreed to market any of these inventions. 

According to TMO's Business Manager, UM tries to attract small
businesses in its licensing efforts through targeted mailings and
phone calls.  These efforts are successful because small businesses
tend to be more entrepreneurial than large companies and are more
interested in marketing new technologies.  As of November 1997, 75 of
UM's 148 license agreements were with small entities, while the
remaining 73 were with large entities.  License agreements for
inventions that were federally funded contain a clause requiring that
the product be substantially manufactured in the United States. 

UM may enter into license agreements with business entities in which
the inventor holds an ownership interest.  The emphasis on
structuring license agreements with start-up companies will be on
helping the company remain viable.  The terms may include royalty
payment, equity interest, or a combination thereof.  License
agreements between UM and an employee or UM and a company in which a
UM employee has either a financial or management interest are subject
to the state of Michigan's Conflict of Interest Statute.  The statute
permits such agreements provided that certain disclosure, approval,
and reporting requirements are met. 

After recovery of UM's out-of-pocket expenses, such as those
necessary for patent protection, marketing, and licensing, aggregate
revenues resulting from royalties and sale of equity interest will be
shared as shown in table X.l. 



                               Table X.1
                
                Royalty Income Distribution Schedule for
                       the University of Michigan

                               Percent of distribution share
                      ------------------------------------------------
                                                   Originating school,
                                                  college, division or
Cumulative                           Originating  other responsibility
net income                Inventor       unit(s)             center(s)
--------------------  ------------  ------------  --------------------
Up to $200,000                  50            25                    25
Over $200,000 (and          33-1/3        33-1/3                33-1/3
 up to $2,000,000)
Over $2,000,000             33-1/3                              66-2/3
----------------------------------------------------------------------
Source:  University of Michigan. 


   BAYH-DOLE'S IMPACT
--------------------------------------------------------- Appendix X:5

During UM's fiscal year 1996, it received 122 invention disclosures,
of which 46 were federally funded.  UM elected to retain title to 20
federally funded inventions and signed 30 license agreements during
the fiscal year.  UM received $231,000 in royalties for federally
funded inventions and $844,000 for other inventions. 

According to TMO's Business Manager, UM has not yet had any
individual inventions that have resulted in a large amount of
royalties.  However, he said many inventions are currently on the
verge of entering the marketplace and appear to be very promising. 
One of these is an intranasal influenza vaccine, which was funded
jointly by a private sponsor and NIH. 


IMPLEMENTING BAYH-DOLE AT THE
UNIVERSITY OF WISCONSIN-MADISON
========================================================== Appendix XI


   FEDERAL RESEARCH
-------------------------------------------------------- Appendix XI:1

According to NSF, the University of Wisconsin-Madison (UWM) received
$207.5 million in federal funds for science and engineering research
in fiscal year 1995, ranking it eighth nationwide.  The bulk of this
funding came from HHS, with $119.1 million in awards, and NSF, with
$33.7 million.  According to information provided by UWM, federal
funding accounted for 56.5 percent of the university's overall
research budget for its fiscal year 1996, which ended June 30, 1996. 


   TECHNOLOGY TRANSFER UNIT
-------------------------------------------------------- Appendix XI:2

The Graduate School's Office of University-Industry Relation (UIR)
has overall responsibility for Bayh-Dole implementation at UWM. 
However, UWM assigns inventions to the Wisconsin Alumni Research
Foundation (WARF), a nonprofit foundation, for invention licensing or
commercialization purposes.  Since WARF was established in 1925, its
primary goals have been providing UWM's scientific discoveries to the
public and providing support for the university's research efforts. 
Through the use of patents and licensing, the foundation (1)
generates funds for further research, (2) provides financial benefits
to inventors, and (3) controls the use of the university's
inventions. 


   REPORTING INVENTIONS
-------------------------------------------------------- Appendix XI:3

UWM researchers are required to disclose all inventions resulting
from federally funded research and development to UIR.  UIR personnel
then evaluate the disclosure to determine the funding sources behind
the invention and forward copies to all of the relevant federal
agencies and to WARF, which assumes the responsibility for reporting
and transmitting the subsequent documentation to the federal funding
agencies.  The foundation is to send the funding agencies copies of
(1) the election letter, (2) the patent application, (3) the
confirmatory license, (4) assignments, (5) notices of foreign
filings, and (6) the patent when issued. 

UIR uses UWM's extramural support databases and commercially
available spreadsheet software to track invention disclosure
information, such as the (1) funding agency, (2) funding agency
contact, (3) grant number, and (4) date of invention disclosure. 
This database goes back only to February 1995, when the Dean of the
Graduate School delegated the responsibility to process disclosures
to UIR.  WARF uses a sophisticated, custom-designed database to track
and report activities involving inventions. 


   LICENSING INVENTIONS
-------------------------------------------------------- Appendix XI:4

Licensing efforts begin as soon as WARF decides to retain the
invention.  In those few instances in which both corporate and
federal funding are involved in an invention, the corporate party
usually is given first right to negotiate a license.  Otherwise, WARF
licensing associates start looking for other potential licensees.  In
some cases, the principal investigator may have some industry sources
or contacts.  The licensing associates also have their own contacts
with companies.  Articles on the invention in scientific publications
may generate inquiries to WARF from private industry. 

WARF negotiates the licensing details, and neither UWM nor the
principal investigator is generally involved in these negotiations. 
WARF prefers license terms that are based on a percentage of the
value of net retail sales; however, other royalty arrangements, such
as a paid-up license or fixed annual fee, may be considered for
selected situations. 

UWM and WARF have no formal mechanism for ensuring that small
businesses receive first opportunity at a license.  However, WARF
personnel were aware of the Bayh-Dole requirement to give priority to
small businesses, and WARF personnel said that most of their
licensing negotiations are with small businesses.  At the time of our
review, WARF had 215 active licenses; 131, or 60.9 percent, of these
were with small entities. 

WARF gives the inventor(s) $1,500 up front when a new invention
patent application is assigned to the foundation.  In addition, WARF
distributes royalty income to the inventor(s) and to UWM on the basis
of a formula set by the university.  In October 1997, UWM revised its
royalty-sharing formula.  UWM's current formula provides that the
first $100,000 in gross income is divided (1) 70 percent to the
inventor's laboratory, (2) 20 percent to the inventor(s), and (3) 10
percent to WARF.  Gross income greater than $100,000 is divided (1)
65 percent to WARF, (2) 20 percent to the inventor(s), and (3) 15
percent to the inventor's department. 

WARF annually distributes a grant to UWM.  The disbursement is equal
to 85 percent or more of a 5-year average of its net income.  Net
income includes income from invention royalties, investments, and
other sources.  WARF has a multimillion-dollar endowment and receives
72 percent of its income from investments.  Income from invention
royalties accounts for 23 percent of WARF's income, and the remaining
5 percent of income is from gifts, donations, and bequests. 


   BAYH-DOLE'S IMPACT
-------------------------------------------------------- Appendix XI:5

During the university's fiscal year 1996, UWM applied for 76 patents
of which 72, or 94.7 percent, involved federal funds.  During this
same period, UWM was issued 47 patents of which 36, or 76.6 percent,
involved federal funds.  As of October 1997, UWM had 215 active
licenses involving 291 inventions.  Of the 215 licenses, 194, or 90.2
percent, involved inventions developed with federal funding. 

According to AUTM, UWM ranked fifth among universities nationwide in
license income--a total of $13.1 million--received from inventions
during UWM's fiscal year 1996.  Of this amount, inventions subject to
Bayh-Dole accounted for $12.9 million, or 98.9 percent.  In UWM's
fiscal year 1996, WARF disbursed $16.4 million to UWM for
research-related purposes.  As explained above, this disbursement
differs from the earnings for Bayh-Dole inventions for UWM's fiscal
year 1996. 

A few successful inventions generate most of the revenue.  The most
impressive example is a 1971 vitamin D discovery that has generated
about $100 million in revenue.  This discovery led to new derivatives
of vitamin D used for the treatment or prevention of osteoporosis,
renal osteodystrophy, and other calcium-related disorders.  More
recently, UWM researchers developed a solution that extends the time
that organs can be held outside a living body prior to an organ
transplant.  This 1989 invention has earned about $8 million to $10
million in licensing income. 


IMPLEMENTING BAYH-DOLE AT HARVARD
UNIVERSITY
========================================================= Appendix XII


   FEDERAL RESEARCH
------------------------------------------------------- Appendix XII:1

According to NSF, Harvard University received $191.5 million in
federal funds for science and engineering research and development in
fiscal year 1995, ranking it number 13 among all U.S.  universities. 
By far the largest source of funds is HHS, which accounted for 70
percent of all federal funds received in fiscal year 1995.  Some
Harvard Medical School faculty have dual appointments at five
independent hospitals--Brigham and Womens, Massachusetts General,
Children's Hospital, Beth Israel-Deaconess, and Dana Farber Cancer
Institute.  These hospitals receive separate funding from NIH, and
each operates its own licensing office. 


   TECHNOLOGY TRANSFER UNIT
------------------------------------------------------- Appendix XII:2

Harvard has a centralized program for monitoring and licensing
activities involving inventions.  All activities are coordinated
through the Office for Technology and Trademark Licensing (OTTL),
which is responsible for recordkeeping and Bayh-Dole reporting.  The
Harvard Medical School has a separate unit that handles licensing
activities for medical school inventions, but this unit reports its
activities to the OTTL. 

The reach of Bayh-Dole is greater at Harvard because of its
affiliation with the aforementioned five hospitals.  Each of these
hospitals ranked among the top 25 recipients of federal funds to
other nonprofit research institutions in fiscal year 1995, according
to NSF.  When Harvard Medical School staff are involved in the
creation of an invention at one of these hospitals, the two
organizations coordinate their activities for such factors as who
reports to the federal agencies, who actually owns the invention, how
royalties will be distributed, and so on. 

Harvard has its own computerized database, known as JAKE, for
tracking and monitoring inventions.  This database tracks patent
prosecution and technology information, government compliance,
license agreements, company data, contract management, legal
expenses, and biomaterial transfers.  On a financial level, the
database assists in analyzing, paying, and invoicing legal expenses;
recording and distributing income; and producing various reports. 
Harvard provides the information needed by NIH for Edison but has not
adopted Edison as its own inventions database.  OTTL officials said
they need the additional data their own system provides and do not
want to run two parallel systems.  Thus, they are taking a
wait-and-see approach to Edison. 


   REPORTING INVENTIONS
------------------------------------------------------- Appendix XII:3

According to university officials, Harvard researchers must sign a
participation agreement that controls the reporting and licensing of
inventions created while working at Harvard.  Periodically, the case
managers contact the university's various departments and deans to
ensure that everyone is familiar with the process.  Forms are
available in every department for reporting inventions to the
university.  Harvard encourages inventions, with an objective of
bringing new products and processes into public use as rapidly as
possible while protecting academic freedoms and generating a return
to the university, the inventors, and their departments. 

Generally, OTTL finds out about an invention when it is contacted by
the inventor.  If the inventor has not already done so, OTTL helps
him or her complete an invention disclosure form.  An OTTL patent
coordinator researches the invention to determine whether federal
funds were involved and thus whether Bayh-Dole applies.  Bayh-Dole is
considered to apply if any federal funds at all were used in
developing the invention.  After the patent coordinator has
established that a federally funded invention appears to exist and
has all the relevant information, OTTL is to report the invention to
the appropriate federal agencies. 

Once the disclosure of the invention is made, Harvard determines
whether it will retain title.  Harvard's philosophy essentially is to
retain title on everything.  However, Harvard officials said they
usually will not pursue a patent unless the university believes it
can make money on the invention.  Similarly, if Harvard obtains a
patent and believes it cannot make money from the invention, Harvard
may well abandon the patent rather than pay one or more of the
maintenance fees assessed by PTO. 


   LICENSING INVENTIONS
------------------------------------------------------- Appendix XII:4

In deciding whether to elect title, Harvard must determine whether
there is a market for the invention.  If the invention was created
under industry-sponsored research, the sponsor is given an option to
license.  Otherwise, the case manager looks for a licensee that can
pay an appropriate royalty and will pursue the development of the
invention.  If there are two or more candidates--not a typical
situation according to university officials--Harvard will focus more
on which one has the ability to bring the product to market.  Most
Harvard licensees are small businesses; however, Harvard has no
formal mechanism for ensuring that small businesses get first
opportunity at a license.  OTTL puts the requirement for substantial
domestic manufacture in its licensing agreements. 

Harvard may work with inventors to begin start-up companies by
helping them raise the necessary capital.  However, this practice is
not the first choice for licensing, and Harvard's rules may sometimes
work against it.  A professor is allowed to work only 1 day a week on
outside interests.  Also, researchers are subject to a
conflict-of-interest policy that would make it difficult for them to
work privately on a project that was in direct competition with the
work they are involved in at Harvard.  The university states its
policy on staff and industry research relationships thusly:  "Harvard
encourages scientifically-productive research collaborations between
its scientists and for-profit companies.  But the maintenance of
academic freedoms--scientific integrity, pursuit of knowledge and the
open exchange of information--remain the first priority."

Harvard uses a sliding scale in distributing royalties, shifting a
portion of the inventor's share to the inventor's department as
royalties increase.  The first $50,000 generated by an invention is
distributed 35 percent to the inventor, 30 percent to the inventor's
department, 20 percent to the inventor's school, and 15 percent to
the university.  Income greater than $50,000 is distributed 25
percent to the inventor, 40 percent to the inventor's department, 20
percent to the inventor's school, and 15 percent to the university. 


   BAYH-DOLE'S IMPACT
------------------------------------------------------- Appendix XII:5

According to data provided to AUTM, Harvard had 112 inventions
disclosed by its researchers, executed 57 new licenses or options,
applied for 53 new patents, and was issued 28 patents during fiscal
year 1996.  At the end of fiscal year 1996, Harvard had 306 active
licensing agreements, 144 (47.1 percent) of which were producing
licensing income.  Licensing income in fiscal year 1996 totaled $7.6
million.  While Harvard does not separately report income from those
inventions subject to Bayh-Dole, it reported that 70 percent of its
sponsored research expenditures were derived from federal sources. 

Like other institutions, the bulk of Harvard's licensing royalties
come from a small number of very successful inventions.  In fiscal
year 1996, for example, $3.9 million, or 52 percent of all royalties,
came from the license for Cardiolite, a heart-imaging contrast agent
developed through funding provided by NIH and DOE.  Another $1.3
million, or 17 percent, came from the license for Sequenase, which
consists of research agents used to determine DNA sequences and which
was developed under an NIH grant. 


IMPLEMENTING BAYH-DOLE AT COLUMBIA
UNIVERSITY
======================================================== Appendix XIII


   FEDERAL RESEARCH
------------------------------------------------------ Appendix XIII:1

Columbia University (CU) received $186.2 million in federal funds for
engineering and science research in fiscal year 1995, according to
NSF, ranking it 14th overall in the nation.  The majority of this
funding came from HHS, which provided $128.6 million in awards.  NSF
was also a significant source of funding, providing about $32
million. 


   TECHNOLOGY TRANSFER UNIT
------------------------------------------------------ Appendix XIII:2

Technology transfer activities at CU are administered by the Columbia
Innovation Enterprise (CIE).  Although CIE has a second office
located on the Health Science Campus, the Executive Director is the
only individual with the authority to sign license agreements for
commercializing inventions.  CIE's mission is to evaluate, protect,
and license CU's intellectual property, increase private-sector
funding for research and development, encourage technology transfer,
distribute income from those activities among CU entities and
faculty, and start up new companies based on CU technology. 
According to its Finance/Administration Director, CIE also provides
some reporting and licensing services for inventions at a nonprofit
hospital with which CU staff are affiliated. 


   REPORTING INVENTIONS
------------------------------------------------------ Appendix XIII:3

As a condition of employment, all CU faculty members and students
engaged in federally funded research must sign an agreement to
promptly report and assign to CU all inventions and discoveries that
may be patentable, as well as the technology associated with them. 
Faculty and staff send invention report forms to CIE, where they are
to be date stamped, checked for signatures and sponsorship, and
reviewed for accuracy and completeness.  Inventor review meetings are
held about 12 times a year and are attended by both CIE staff and
outside patent counsel.  Inventors are allotted 45-minute time slots
to discuss their inventions.  The decision on whether to retain title
to inventions is typically made immediately following these meetings. 
According to CIE's Executive Director, CU will generally elect title
to an invention if it is "good science," has commercial applications,
and makes good business sense.  A financial analyst is to send a copy
of the invention report and CU's decision whether to elect or waive
title to the appropriate funding agency. 

The process of reporting inventions is tracked through a
custom-designed computer database.  Although CIE staff have not used
NIH's Edison system to electronically submit reports on inventions to
funding agencies, they have used the system to prepare an annual
utilization report for NIH.  According to the CIE's
Finance/Administration Director, a programmer has been working to
correct problems that have been identified in CU's use of Edison. 


   LICENSING INVENTIONS
------------------------------------------------------ Appendix XIII:4

According to CIE officials, CIE markets new technologies through its
Internet website and personal contact with companies that may be
interested in particular technologies.  Corporate sponsors have the
first option on any technologies that arise out of the research they
have sponsored.  Although CIE has no formal mechanism for ensuring
that small businesses receive preference in the licensing process,
the majority of its license agreements are with small businesses
because they are typically more interested in new technology.  As of
October 1997, 245 of CU's 463 license agreements were with small
entities, while the remaining 218 were with large entities.  License
agreements for inventions that were federally funded contain the
provision that the licensee will comply with all governmental
regulations. 

After the recovery of the university's expenses, calculated as 20
percent of the gross income, net proceeds from an invention are first
distributed among the inventor, the inventor's research activities,
and the university.  The inventor receives 50 percent of net income
up to $100,000 and 25 percent of the excess.  The inventor also
receives 25 percent of net income to spend on research activities or
any other proper and specific purposes of the university designated
by the inventor.  This income is subject to certain restrictions. 
The university receives 25 percent of net income up to $100,000 and
33 percent of the excess.  After royalties have been allocated among
the inventor, the inventor's research activities, and the university,
any remaining funds are divided equally between the inventor's
department and faculty but are subject to certain restrictions. 


   BAYH-DOLE'S IMPACT
------------------------------------------------------ Appendix XIII:5

During CU's fiscal year 1996, it received 145 invention reports, of
which 62 were federally funded.  The university elected to retain
title to 55 federally funded inventions.  The university signed 62
license agreements during the year.  The university received $38.8
million in royalties for federally funded inventions and $1.8 million
for other inventions.  According to CU's estimates, licensing fees at
Columbia represent product sales of approximately $4 billion. 

One of CU's highest profile inventions is the co-transformation
process, a gene transfer process that can produce a specific protein
for commercial production.  The process was patented in 1983, has
been used by 28 companies to make new pharmaceuticals, and was
critical in the development of a blood-clot-dissolving protein. 
Other such inventions include Xalatan, a new drug for treating
glaucoma, and Avonex, a new drug for treating multiple sclerosis. 
Also, CU joined with a group of electronic manufacturers to pool
patents relating to the MPEG2 video compression standard.  The MPEG2
Standard is involved in the transmission, broadcast, and reproduction
of all digital video signals. 


IMPLEMENTING BAYH-DOLE AT MICHIGAN
STATE UNIVERSITY
========================================================= Appendix XIV


   FEDERAL RESEARCH
------------------------------------------------------- Appendix XIV:1

Michigan State University (MSU) received about $69.2 million in
federal funds for engineering and science research and development in
fiscal year 1995, according to NSF, ranking it 55th overall in the
nation.  The majority of this funding came from NSF, with $22.9
million in awards, and HHS, with $22.6 million.  USDA was also a
significant source of funding, awarding MSU about $13.4 million. 
According to a university official, MSU is not responsible for any
research activities at affiliate organizations that receive separate
funding. 


   TECHNOLOGY TRANSFER UNIT
------------------------------------------------------- Appendix XIV:2

Technology transfer activities at MSU are administered by the Office
of Intellectual Property (OIP).  MSU provides OIP with office space
and services, such as phones and facsimile machines, and pays the
salary of one professional employee.  The Michigan State University
Foundation (MSUF) funds the salaries of the OIP Director and other
employees with licensing royalty income.  MSUF also pays for other
expenses, such as office supplies and legal fees.  According to the
OIP Director, MSUF is a separate, nonprofit organization that was
established to manage licensing royalty income from MSU's inventions. 


   REPORTING INVENTIONS
------------------------------------------------------- Appendix XIV:3

OIP requests that MSU researchers report their inventions as early as
possible.  As a result, invention disclosure forms may arrive in OIP
before the inventions are fully developed.  OIP personnel enter the
information from these forms into an electronic database, and a
licensing associate meets with the inventor to discuss the invention. 
An inventions review committee then evaluates each invention to
determine whether it should be patented.  The committee, which meets
periodically throughout the year, is comprised of representatives
from both MSU and MSUF.  During these meetings, committee members are
updated on the status of inventions, patent applications, and license
agreements.  The Director of OIP stated that he and his staff are
successful in reporting federally funded inventions to the respective
funding agencies within the required 60-day time frame about 95
percent of the time. 

According to the OIP Director, OIP purchased the rights to use the
Daily Evaluation and Licensing Support database system from the
Washington Research Foundation.  OIP has chosen not to use NIH's
Edison system because it does not see any advantages in doing so. 
However, the Director stated that he would use Edison if it became a
requirement. 


   LICENSING INVENTIONS
------------------------------------------------------- Appendix XIV:4

MSU previously used a contractor, RCT, to market some of its
technologies.  While RCT was not MSU' s exclusive marketing agent,
MSU had signed a contract that specified various terms of its
relationship with RCT, such as royalty income distribution.  In March
1995, MSU notified RCT that it wanted to terminate the existing
contract.  RCT and MSU are currently working through the details of
this termination (such as how future royalties from existing licenses
for MSU inventions will be distributed) in an ongoing arbitration
case. 

OIP and MSUF currently market all new MSU inventions.  According to
the OIP Director, these inventions are marketed in various ways, such
as at technology transfer conferences, through phone calls to
potential licensees, and on the Internet.  The OIP Director said that
MSU does not have a need to ensure that small businesses are given
preference in licensing federally funded inventions because the vast
majority of its licensees are small businesses.  As of November 1997,
47 of MSU's 55 active license agreements were with small entities,
while the remaining 8 were with large entities. 

The first $1,000 of royalty income is distributed to the inventor
when it is received.  No further distributions are made until all
patenting and licensing costs are recovered.  Distributions are made
from the net income remaining, according to the schedule shown in
table XIV.1. 



                              Table XIV.1
                
                Royalty Income Distribution Schedule for
                       Michigan State University

                                            Percent of distribution
                                                     share
                                          ----------------------------
                                                    Academic  Universi
Net royalty income                        Inventor     units        ty
----------------------------------------  --------  --------  --------
First $1,000                                   100
Next $100,000                               33-1/3    33-1/3    33-1/3
Next $400,000                                   30        30        40
Next $500,000                                   20        20        60
All additional net royalties over               15        15        70
 $1,001,000
----------------------------------------------------------------------
Source:  Michigan State University. 


   IMPACT OF FEDERAL RESEARCH
   FUNDING
------------------------------------------------------- Appendix XIV:5

During MSU's fiscal year 1996, which ended on June 30, 1996,
university staff received 90 invention disclosures.  MSU signed 16
license agreements during the year and received about $17.2 million
in licensing royalty income.  About $16.8 million of this amount was
from federally funded inventions. 

Two of MSU's most successful inventions provide the vast majority of
its royalty income.  These inventions involve the use of platinum
complexes as anti-tumor agents.  The research that led to the
inventions was funded by NIH and two companies.  According to the OIP
Director, these inventions account for approximately 98 percent of
MSU's total royalty income. 


IMPLEMENTING BAYH-DOLE AT THE
UNIVERSITY OF CALIFORNIA
========================================================== Appendix XV


   FEDERAL RESEARCH
-------------------------------------------------------- Appendix XV:1

According to NSF, the University of California (UC) received $1.1
billion in federal funds for science and engineering research and
development in fiscal year 1995.  The bulk of this funding came from
HHS, with $626.4 million in awards, and NSF, with $162.7 million in
awards.  According to information provided by UC, federal agencies
provided 57.2 percent of the direct research funds expended in its
fiscal year 1996, which ended June 30, 1996. 

UC manages three laboratories for DOE.  Since 1988, each of these
laboratories has had its own independent technology transfer office. 
UC reports on activity and financial information for the DOE
laboratories separately. 


   TECHNOLOGY TRANSFER UNIT
-------------------------------------------------------- Appendix XV:2

UC considers technology transfer an important part of its public
service mission.  UC states that the major objectives of its patent
program are ".  .  .  to promote the progress of science and
technology, to assure that inventions are made available to the
public, and to provide appropriate royalty revenues to the University
and to inventors." UC designated the Office of Technology Transfer
(OTT) as the responsible unit for the operation and management of
UC's technology transfer program.  OTT also manages a small portfolio
of DOE laboratory inventions disclosed prior to 1988.  In addition,
UC manages some more recent DOE inventions having UC co-inventors. 
UC is implementing a "distributed" or decentralized approach to
technology transfer.  Since January 1990, UC has created independent
technology transfer offices at the Berkeley, Los Angeles, San Diego,
and San Francisco campuses. 

OTT receives invention disclosures from UC campuses without
independent technology transfer offices and manages a large portfolio
of older inventions from all nine campuses.  For the inventions it
manages, OTT carries out reporting, patenting, and licensing
activities.  In addition, OTT performs certain systemwide functions,
such as (1) intellectual property policy guidance, (2) legislative
analysis, (3) legal review of all proposed UC license agreements, and
(4) coordination of annual reporting. 

The four independent campus technology transfer offices receive
invention disclosures from their respective campuses.  The campus
technology transfer offices manage the patenting, marketing, and
licensing of most new inventions, while inventions existing at the
time the offices were created or that relate to older inventions are
managed by OTT.  For the Irvine campus, OTT manages the patenting
activities, while the campus is responsible for marketing and
licensing selected inventions. 


   REPORTING INVENTIONS
-------------------------------------------------------- Appendix XV:3

UC's policy requires university employees to promptly disclose
inventions resulting from their research activities at UC.  OTT has
one group that receives and handles disclosures and subsequently
reports them to the appropriate federal agencies.  Each invention has
a reporting requirements check list that is initialed by OTT
personnel as the reports are accomplished.  OTT sends the funding
agencies copies of (1) the election letter, (2) the patent
application, (3) the confirmatory license, (4) notices of foreign
filings, and (5) the patent when issued. 

OTT has developed a customized automated database that provides a
calendar function which alerts OTT on reporting dates and provides
status reports.  This system provides data for inventions case
management, reporting data for the federal government, licensing
activity, license income, license income disbursement, and
post-license diligence monitoring. 


   LICENSING INVENTIONS
-------------------------------------------------------- Appendix XV:4

OTT assigns inventions to licensing associates who are responsible
for commercializing the invention.  As part of this process, the
licensing associates will

  -- review the invention for patentability and commercial potential;

  -- discuss the invention with the inventor to determine if the
     invention has been reduced to practice and to obtain commercial
     leads;

  -- send the invention to a patent attorney for a search of the art;

  -- make the decision to patent on the basis of patentability,
     commercial potential, and other factors; and

  -- review the obligation to sponsors before attempting to market
     the invention. 

If OTT decides to patent, the licensing associate puts together a
technical package for the invention.  In an effort to find a
licensee, the associate will put the invention on OTT's Internet web
site, develop a list of companies that may be interested, and mail
technical packages to and call potential licensees. 

OTT has no formal mechanism for ensuring that small businesses get
first opportunity at a license.  However, OTT personnel were aware of
the Bayh-Dole requirement to give priority to small businesses.  For
OTT-managed inventions, 164, or 52 percent, of the 315 licenses for
utility patents were with small businesses.  Nearly all of the 371
licenses for plant patents are with small businesses. 

Effective October 1, 1997, UC revised its formula for sharing
inventions' royalty income universitywide.  The formula provides that
the inventor(s) receive 35 percent of the net income.  Of the
remaining net income, 15 percent goes to research at the inventor's
campus or laboratory, and 50 percent is allocated to a general pool
at the inventor's campus or laboratory. 


   BAYH-DOLE'S IMPACT
-------------------------------------------------------- Appendix XV:5

For UC's fiscal years 1992 through 1996, university staff reported
2,795 inventions to all UC technology transfer offices, including
OTT.  In UC's fiscal year 1996, 661 inventions were reported to UC. 
UC did not provide a breakout of the inventions involving federal
funding universitywide.  For OTT alone, in UC's fiscal years 1991
through 1996, university staff reported 2,238 inventions.  Federal
funds were involved in 1,264, or 56.5 percent, of the total
disclosures. 

In UC's fiscal years 1991 through 1996, UC applied for 1,662 patents
based on inventions disclosed to OTT.  Of these applications, 883, or
53.1 percent, involved federal funding.  In UC's fiscal year 1996, UC
(all campuses) applied for 325 U.S.  patents and 150 foreign patents. 
In UC's fiscal year 1996, 159 U.S.  patents and 250 foreign patents
were issued to UC (all campuses).  At the end of UC's fiscal year
1996, UC had 1,132 U.S.  patents and 1,183 foreign patents in its
portfolio. 

In UC's fiscal year 1996, UC issued 108 license agreements for all
campuses, and as of June 30, 1996, UC had a total of 755 active
licenses.  Of the 686 of these licenses that were in OTT's portfolio,
34.1 percent were from inventions developed with federal research and
development funds. 

According to AUTM, the UC system ranked first among universities
nationwide in license income received from inventions during UC's
fiscal year 1996-- a total of $63.2 million.  From UC's fiscal year
1991 to 1996, license royalty income for OTT-managed inventions only
was $261.0 million, and royalty income from government-funded
inventions amounted to $135.2 million, or 51.8 percent. 

A few successful inventions generated the bulk of the licensing
revenue.  As of June 30, 1996, UC had 437 inventions that generated
income.  The top 5 income-earning inventions earned $46.2 million,
while the top 25 earned $56.0 million in the university's fiscal year
1996.  One percent of the income-generating inventions earned 73
percent of the total income.  One example of a success story is an
artificial lung surfactant discovered at UC San Francisco in 1980
with the assistance of NIH funding.  UC credits this surfactant with
saving the lives of 20,000 infants a year while earning $0.7 million
in UC's fiscal year 1996.  Another example is a nicotine patch
developed by UC Los Angeles in 1984 with VA funding.  This device
assists smokers to stop smoking and in UC's fiscal year 1996, earned
$1.6 million. 


INVENTIONS ACTIVITIES REPORTED BY
U.S.  UNIVERSITIES TO AUTM'S
FISCAL YEAR 1996 SURVEY
========================================================= Appendix XVI



                                       Table XVI.1
                         
                          AUTM Survey Responses--All Respondents

                                                              Change from
                              Fiscal year     Fiscal year            1995
                                   1996\a          1995\b         to 1996  Percent change
-------------------------  --------------  --------------  --------------  --------------
Research expenditures:     $1,530,203,487  $1,362,478,058    $167,725,429           12.31
 industrial sources
Research expenditures:     $12,317,829,55  $11,380,770,35    $937,059,199            8.23
 federal government                     1               2
 sources
Total sponsored research   $18,688,253,79  $17,211,913,18  $1,476,340,611            8.58
 expenditures                           6               5
Licenses/options executed           2,209           2,142              67            3.13
Gross license income         $365,218,642    $299,148,128     $66,070,514           22.09
 received
License income paid to        $28,591,054     $25,621,678      $2,969,376           11.59
 other institutions
Licenses/options yielding           4,958           4,272             686           16.06
 license income
Legal fees expended           $75,096,654     $60,233,235     $14,863,419           24.68
Legal fees reimbursed         $28,567,190     $25,870,778      $2,696,412           10.42
Invention disclosures               8,119           7,427             692            9.32
 received
Total U.S. patent                   3,872           5,100          -1,228          -24.08
 applications filed
New U.S. patent                     2,734           2,373             361           15.21
 applications filed
U.S. patents issued                 1,776           1,550             226           14.58
-----------------------------------------------------------------------------------------
\a A total of 131 universities responded. 

\b A total of 127 universities responded. 

Source:  AUTM. 



                                          Table
                         
                         XVI.2: AUTM Survey Responses--Recurring
                          Respondents, Fiscal Years 1991 Through
                                           1996

                                                              Change from
                              Fiscal year     Fiscal year            1995
                                   1996\a          1995\b         to 1996  Percent change
-------------------------  --------------  --------------  --------------  --------------
Research expenditures:     $1,052,715,974    $913,644,931     139,071,043           15.22
 industrial sources
Research expenditures:     $9,302,549,690  $8,767,424,553     535,125,137            6.10
 federal government
 sources
Total sponsored research   $13,534,156,38  $12,650,055,74     884,100,642            6.99
 expenditures                           6               4
Licenses/options executed           1,632           1,506             126            8.37
Gross license income         $328,741,253    $272,637,217      56,104,036           20.58
 received
Licenses/options yielding           3,887           3,373             514           15.24
 license income
Legal fees expended           $58,629,666     $44,233,131      14,396,535           32.55
Legal fees reimbursed         $22,104,222     $18,945,793       3,158,429           16.67
Invention disclosures               6,101           5,576             525            9.42
 received
Total U.S. patent                   2,799           3,807          -1,008          -26.48
 applications filed
New U.S. patent                     2,013           1,780             233           13.09
 applications filed
U.S. patents issued                 1,519           1,351             168           12.44
-----------------------------------------------------------------------------------------
\a A total of 73 respondents. 

\b A total of 78 respondents. 

Source:  AUTM. 




(See figure in printed edition.)Appendix XVII
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
========================================================= Appendix XVI



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Department of Commerce's
letter dated April 15, 1998. 


   GAO'S COMMENTS
------------------------------------------------------- Appendix XVI:1

1.  We agreed with the technical clarifications suggested by the
Department of Commerce and incorporated them into our report as
appropriate. 

2.  In connection with the Department's suggestion that we cite all
previous GAO reports that concerned Bayh-Dole, we did not believe
this was necessary because most of these reports were more than 10
years old.  We did list our most recent report, which was issued in
1991. 


MAJOR CONTRIBUTORS TO THIS REPORT
======================================================= Appendix XVIII

RESOURCES, COMMUNITY AND ECONOMIC
DEVELOPMENT DIVISION

Fran Featherston
Frankie Fulton
John P.  Hunt, Jr.
Deborah Ortega
Paul Rhodes
Mindi Weisenbloom


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