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105th Congress                                            Rept. 105-620
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part I
_______________________________________________________________________


 
           TECHNOLOGY TRANSFER COMMERCIALIZATION ACT OF 1998

_______________________________________________________________________


                 July 14, 1998.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 2544]

      [Including cost estimate of the Congressional Budget Office]

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



                            C O N T E N T S

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

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

                              I. Amendment

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

SECTION 1. SHORT TITLE.

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

SEC. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

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

SEC. 3. LICENSING FEDERALLY OWNED INVENTIONS.

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

``Sec. 209. Licensing federally owned inventions

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

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

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

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

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

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

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

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

                        II. Purpose of the Bill

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

              III. Background and Need for the Legislation

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

                        IV. Summary of Hearings

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

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

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

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

                          V. Committee Actions

Subcommittee Markup

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

Committee Markup

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

              VI. Summary of Major Provisions of the Bill

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

                    VII. Section-by-Section Analysis

SECTION 1. SHORT TITLE.

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

SECTION. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

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

SECTION 3. LICENSING FEDERALLY OWNED INVENTIONS.

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

SECTION 4. TECHNICAL AMENDMENTS TO BAYH-DOLE ACT.

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

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

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

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

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

                         VIII. Committee Views

SECTION 1. SHORT TITLE.

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

SECTION. 2. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

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

SECTION 3. LICENSING FEDERALLY OWNED INVENTIONS.

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

SECTION 4. TECHNICAL AMENDMENTS TO BAYH-DOLE ACT.

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

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

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

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

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

                      IX. Committee Cost Estimate

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

              X. Congressional Budget Office Cost Estimate

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

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

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

Enclosure

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

                  XI. Compliance with Public Law 104-4

    H.R. 2544 contains no unfunded mandates.

         XII. Committee Oversight Findings and Recommendations

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

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

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

                XIV. Constitutional Authority Statement

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

                XV. Federal Advisory Committee Statement

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

                 XVI. Congressional Accountability Act

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

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



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

STEVENSON-WYDLER TECHNOLOGY INNOVATION ACT OF 1980

           *       *       *       *       *       *       *


SEC. 12. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.

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

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


                              ----------                              


TITLE 35, UNITED STATES CODE

           *       *       *       *       *       *       *


PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *


Sec. 202. Disposition of rights

    (a) * * *

           *       *       *       *       *       *       *

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

           *       *       *       *       *       *       *


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

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

           *       *       *       *       *       *       *


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

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

Sec. 209. Licensing federally owned inventions

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

           *       *       *       *       *       *       *


                    XVIII. Committee Recommendations

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

               XIX. Exchange of Committee Correspondence





               XX. Proceedings of the Subcommittee Markup



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

                              ----------                              


                        THURSDAY, MARCH 26, 1998

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





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



                   FULL COMMITTEE MARKUP OF H.R. 2544

                              ----------                              


                        WEDNESDAY, MAY 13, 1998

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





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