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Nanotechology Funding: Government and Corporate Funding Dwarf Venture Capital Funding.

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Sean Murdock. Testimony before the Research Subcommittee of the Committee on Science of the United States House of Representative. Hearing on: "Nanotechnology: Where Does the US Stand?" June 29th, 2005.

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Nanotechology Innovation Process: The Number of US startups Is Stagnating.

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Sean Murdock. Testimony before the Research Subcommittee of the Committee on Science of the United States House of Representative. Hearing on: "Nanotechnology: Where Does the US Stand?" June 29th, 2005.

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Nanotechology Innovation Process: Patenting by US Inventors Is Growing Rapidly.

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Sean Murdock. Testimony before the Research Subcommittee of the Committee on Science of the United States House of Representative. Hearing on: "Nanotechnology: Where Does the US Stand?" June 29th, 2005.

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Source: Office of Science and Technology Policy. National Critical Technologies List, March 1995.
Available at: http://clintonl.nara.gov/White_House/EOP/OSTP/CTIformatted/AppA/appa.html

This paper summarizes findings and recommendations from a variety
of recently published reports and papers as input to the deliberations of
the Committee on Prospering in the Global Economy of the 21st

Century. Statements in this paper should not be seen as the
conclusions of the National Academies or the committee.

Ensuring That the United States Has

the Best Environment for Innovation

Summary

A number of recent reports have raised concerns about the United States' longterm ability to sustain its global science and engineering (S&E) leadership.' They argue that erosion of this leadership threatens our ability to reap the rewards of innovation in the form of higher incomes and living standards, better health, a cleaner environment, and other societal benefits.

Certainly, the leadership position the United States has maintained in research and the creation of new knowledge since World War II has been an important contributor to economic growth and other societal rewards. However, a look at US history and some contemporary international examples shows that leadership in research is not a sufficient condition for gaining the lion's share of benefits from innovation. A favorable environment for innovation is also necessary. The environment for innovation includes such elements as the market and regulatory environment, trade policy, intellectualproperty policies, policies that affect the accumulation of human capital, and policies affecting innovation environments in specific regions. In addition, grand challenges issued by the president (such as the reaction to Sputnik and the call for the Apollo project) can mobilize resources and the national imagination in pursuit of important innovation-related goals.

How can the United States sustain and improve the environment for innovation even in a future where its relative share of global S&E inputs to the innovation process (such as R&D spending, S&E personnel, and the quantity and quality of scientific literature) declines?

Many approaches to improving the innovation environment have been suggested. On some issues, including the offshoring of service-industry jobs, contradictory diagnoses and prescriptions have emerged on the basis of interests and political outlook

1

American Electronics Association, Losing the Competitive Advantage? The Challenge for Science and Technology in the United States. Washington, DC: American Electronics Association, 2004. Council on Competitiveness, Innovate America, Washington, DC: Council on Competitiveness, 2004. Richard B. Freeman, "Does Globalization of the Scientific/Engineering Workforce Threaten US Economic Leadership?" NBER Working Paper 11457, Cambridge, MA: National Bureau of Economic Research, 2005. Task Force on the Future of American Innovation, The Knowledge Economy: Is America Losing Its Competitive Edge? Washington, DC: 2005.

of the analysis. On other issues, such as patent-system reform, similar suggestions have emerged from several different reports. The approaches suggested include the following:

Market, Regulatory, and Legal Environment

• Establish a public-private body to assess the impact of new regulations on
innovation.

Reduce the costs of tort litigation for the economy.
Reform Section 404 of the Sarbanes-Oxley Act.

Drop current efforts to expense stock options.

• Create best practices for collaborative standard-setting.

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Undertake market and regulatory reforms in the telecommunications industry with the goal of accelerating the speed and accessibility of networks.

Trade

• Increase focus on enforcement of the prevailing global rules for intellectualproperty protection, particularly in China and in other countries where significant problems remain.

· Make completion of the Doha Round of world-trade talks a priority.

Intellectual Property

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Harmonize the US, European, and Japanese patent systems.
Institute a postgrant open-review procedure for US patents.

Stop diverting patent application fees to general revenue to provide the US Patent

and Trademark Office (USPTO) with sufficient resources to modernize and

improve performance.

Shield some research uses of patented inventions from liability for infringement. • Leverage the patent database as an innovation tool.

Tax Policy

· Make the R&D tax credit permanent, and extend coverage to research conducted in university-industry consortia.

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Provide new tax incentives for early-stage investments in innovative startups. Provide more favorable tax treatment (expensing and accelerated depreciation) for the purchase of high-technology manufacturing equipment to encourage industry to keep manufacturing in the United States.

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